SAGA COMMUNICATIONS INC 10-Q

Item 1. Financial Statements SAGA COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ ​ 2021 ​ 2020 ​ (Unaudited) (Note) ​ ​ ​ (In thousands) ​ Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 62,181 ​ $ 51,353 ​ Accounts receivable, net ​ 15,987 ​ 15,732 ​ Prepaid expenses and other current assets ​ 2,629 ​ 2,988 ​ Barter transactions ​ 1,273 ​ 895 ​ Total current assets ​ 82,070 ​ 70,968 ​ Property and equipment ​ 144,001 ​ 142,680 ​ Less accumulated depreciation ​ 90,550 ​ 87,795 ​ Net property and equipment ​ 53,451 ​ 54,885 ​ Other assets: ​ ​ ​ ​ ​ ​ ​ Broadcast licenses, net ​ 90,277 ​ 90,208 ​ Goodwill ​ 19,209 ​ 19,106 ​ Other intangibles, right of use assets, deferred costs and investments, net ​ 10,107 ​ 11,321 ​ ​ ​ $ 255,114 ​ $ 246,488 ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 2,359 ​ $ 2,212 ​ Accrued payroll and payroll taxes ​ 6,901 ​ 5,660 ​ Dividend payable ​ 956 ​ — ​ Other accrued expenses ​ 5,033 ​ 5,267 ​ Barter transactions ​ 1,114 ​ 795 ​ Current portion of long-term debt ​ 10,000 ​ — ​ Total current liabilities ​ 26,363 ​ 13,934 ​ Deferred income taxes ​ 25,017 ​ 24,607 ​ Long-term debt ​ — ​ 10,000 ​ Other liabilities ​ 6,370 ​ 7,405 ​ Total liabilities ​ 57,750 ​ 55,946 ​ Commitments and contingencies ​ — ​ — ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ Common stock ​ 77 ​ 77 ​ Additional paid-in capital ​ 69,748 ​ 68,900 ​ Retained earnings ​ 164,543 ​ 158,990 ​ Treasury stock ​ ( 37,004 ) ​ ( 37,425 ) ​ Total stockholders’ equity ​ 197,364 ​ 190,542 ​ ​ ​ $ 255,114 ​ $ 246,488 ​ ​ Note: The balance sheet at December 31, 2020 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. See accompanying notes to unaudited condensed consolidated financial statements. ​ 3 Table of Contents SAGA COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ 2021 2020 2021 2020 ​ ​ (Unaudited) ​ ​ (In thousands, except per share data) Net operating revenue ​ $ 28,845 $ 24,143 $ 79,192 $ 67,060 Station operating expenses ​ 21,690 ​ 19,616 61,630 ​ 60,467 Corporate general and administrative ​ 2,538 ​ 2,838 7,470 ​ 8,923 Other operating (income) expense, net ​ ​ ( 2 ) ​ ​ 50 ​ ​ ( 25 ) ​ ​ ( 1,234 ) Impairment of broadcast licenses ​ — ​ 1,392 — ​ 5,149 Operating income (loss) ​ 4,619 ​ 247 10,117 ​ ( 6,245 ) Interest expense ​ 73 ​ 75 218 ​ 265 Interest income ​ ( 4 ) ​ ( 8 ) ( 14 ) ​ ( 141 ) Other income ​ ​ ( 279 ) ​ ​ — ​ ​ ( 582 ) ​ ​ ( 213 ) Income (loss) before income tax expense (benefit) ​ 4,829 ​ 180 10,495 ​ ( 6,156 ) Income tax expense (benefit) ​ 1,375 ​ 1,130 3,030 ​ ( 1,975 ) Net income (loss) ​ $ 3,454 ​ $ ( 950 ) $ 7,465 ​ $ ( 4,181 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.58 ​ $ ( 0.16 ) $ 1.25 ​ $ ( 0.70 ) Diluted ​ $ 0.58 ​ $ ( 0.16 ) $ 1.25 ​ $ ( 0.70 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares ​ 5,917 ​ 5,869 5,916 ​ 5,867 Weighted average common and common equivalent shares ​ 5,917 ​ 5,869 5,916 ​ 5,867 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends declared per share ​ $ 0.16 ​ $ - $ 0.32 ​ $ 0.32 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ ​ 4 Table of Contents SAGA COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2019 ​ 6,771 ​ $ 68 ​ 954 ​ $ 9 ​ $ 66,811 ​ $ 162,822 ​ $ ( 37,358 ) ​ $ 192,352 Net income, three months ended March 31, 2020 — ​ ​ — — ​ — ​ — ​ 1,680 ​ — ​ 1,680 Dividends declared per common share — ​ — — ​ — ​ — ​ ( 1,919 ) ​ — ​ ( 1,919 ) Compensation expense related to restricted stock awards — ​ — — ​ — ​ 569 ​ — ​ — ​ 569 Purchase of shares held in treasury — ​ — — ​ — ​ — ​ — ​ ( 20 ) ​ ( 20 ) 401(k) plan contribution — ​ — — ​ — ​ ( 131 ) ​ — ​ 382 ​ 251 Balance at March 31, 2020 6,771 ​ $ 68 954 ​ $ 9 ​ $ 67,249 ​ $ 162,583 ​ $ ( 36,996 ) ​ $ 192,913 Net loss, three months ended June 30, 2020 — ​ — — ​ — ​ — ​ ( 4,911 ) ​ — ​ ( 4,911 ) Forfeiture of restricted stock ( 2 ) ​ — — ​ — ​ — ​ — ​ — ​ — Compensation expense related to restricted stock awards — ​ — — ​ — ​ 612 ​ — ​ — ​ 612 Purchase of shares held in treasury — ​ — — ​ — ​ — ​ — ​ ( 21 ) ​ ( 21 ) Balance at June 30, 2020 6,769 ​ $ 68 954 ​ $ 9 ​ $ 67,861 ​ $ 157,672 ​ $ ( 37,017 ) ​ $ 188,593 Net loss, three months ended September 30, 2020 ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 950 ) ​ ​ — ​ ​ ( 950 ) Compensation expense related to restricted stock awards ​ — ​ ​ — ​ — ​ ​ — ​ ​ 618 ​ ​ — ​ ​ — ​ ​ 618 Purchase of shares held in treasury ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 22 ) ​ ​ ( 22 ) Balance at September 30, 2020 ​ 6,769 ​ $ 68 ​ 954 ​ $ 9 ​ $ 68,479 ​ $ 156,722 ​ $ ( 37,039 ) ​ $ 188,239 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 — ​ — — ​ — ​ — ​ 758 ​ — ​ 758 Compensation expense related to restricted stock awards — ​ — — ​ — ​ 343 ​ — ​ — ​ 343 401(k) plan contribution — ​ — — ​ — ​ ( 200 ) ​ — ​ 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 — ​ — — ​ — ​ — ​ 3,253 ​ — ​ 3,253 Dividends declared per common share — ​ — — ​ — ​ — ​ ​ ( 956 ) ​ — ​ ( 956 ) Compensation expense related to restricted stock awards — ​ — — ​ — ​ 357 ​ — ​ — ​ 357 Balance at June 30, 2021 6,785 ​ $ 68 938 ​ $ 9 ​ $ 69,400 ​ $ 162,045 ​ $ ( 37,004 ) ​ $ 194,518 Net income, three months ended September 30, 2021 ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 3,454 ​ ​ — ​ ​ 3,454 Dividends declared per common share ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 956 ) ​ ​ — ​ ​ ( 956 ) Compensation expense related to restricted stock awards ​ — ​ ​ — ​ — ​ ​ — ​ ​ 348 ​ ​ — ​ ​ — ​ ​ 348 Balance at September 30, 2021 ​ 6,785 ​ $ 68 ​ 938 ​ $ 9 ​ $ 69,748 ​ $ 164,543 ​ $ ( 37,004 ) ​ $ 197,364 See accompanying notes to unaudited condensed consolidated financial statements. ​ 5 Table of Contents SAGA COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ ​ September 30, ​ ​ 2021 2020 ​ ​ ​ (Unaudited) ​ ​ ​ (In thousands) ​ ​ Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ $ 13,905 ​ $ 8,206 ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ( 2,687 ) ​ ( 1,880 ) ​ ​ Acquisition of broadcast properties ​ ( 150 ) ​ ( 190 ) ​ ​ Proceeds from sale and disposal of assets ​ ​ 138 ​ ​ 1,675 ​ ​ Proceeds from insurance claims ​ 567 ​ ​ 213 ​ ​ Other investing activities ​ 11 ​ — ​ ​ Net cash used in investing activities ​ ( 2,121 ) ​ ( 182 ) ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ Cash dividends paid ​ ( 956 ) ​ ( 3,716 ) ​ ​ Purchase of treasury shares ​ — ​ ( 63 ) ​ ​ Net cash used in financing activities ​ ( 956 ) ​ ( 3,779 ) ​ ​ Net increase in cash and cash equivalents ​ 10,828 ​ 4,245 ​ ​ Cash and cash equivalents, beginning of period ​ 51,353 ​ 44,034 ​ ​ Cash and cash equivalents, end of period ​ $ 62,181 ​ $ 48,279 ​ ​ ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ ​ 6 Table of Contents ​ SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for annual financial statements. In our opinion, the accompanying financial statements include all adjustments of a normal, recurring nature considered necessary for a fair presentation of our financial position as of September 30, 2021 and the results of operations for the three and nine months ended September 30, 2021 and 2020. Results of operations for three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. We own or operate broadcast properties in 27 markets, including 79 FM and 34 AM radio stations and 79 metro signals. For further information, refer to the consolidated financial statements and footnotes thereto included in the Saga Communications, Inc. annual report on Form 10-K for the year ended December 31, 2020. We have evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2021, for items that should potentially be recognized in these financial statements or discussed within the notes to these financial statements. 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 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ The following table sets forth the computation of basic and diluted earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ 2021 2020 2021 2020 ​ ​ (In thousands, except per share data) Numerator: ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 3,454 ​ $ ( 950 ) ​ $ 7,465 ​ $ ( 4,181 ) ​ Less: Income (loss) allocated to unvested participating securities ​ 37 ​ ( 20 ) ​ 80 ​ ( 86 ) ​ Net income (loss) available to common stockholders ​ $ 3,417 ​ $ ( 930 ) ​ $ 7,385 ​ $ ( 4,095 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator for basic earnings per share — weighted average shares ​ 5,917 ​ 5,869 ​ 5,916 ​ 5,867 ​ Effect of dilutive securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock equivalents ​ — ​ — ​ — ​ — ​ Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions ​ 5,917 ​ 5,869 ​ 5,916 ​ 5,867 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.58 ​ $ ( 0.16 ) ​ $ 1.25 ​ $ ( 0.70 ) ​ Diluted ​ $ 0.58 ​ $ ( 0.16 ) ​ $ 1.25 ​ $ ( 0.70 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ There were no stock options outstanding that had an antidilutive effect on our earnings per share calculation for the three and nine months ended September 30, 2021 and 2020, respectively. The actual effect of these shares, if any, on the diluted earnings per share calculation will vary significantly depending on the fluctuation in the stock price. Financial Instruments Our financial instruments are comprised of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities. The carrying value of long-term debt approximates fair value as it carries interest rates that either fluctuate with the euro-dollar rate, prime rate or have been reset at the prevailing market rate at September 30, 2021. Allowance for Doubtful Accounts A provision for doubtful accounts is recorded based on our judgment of collectability of receivables. Amounts are written off when determined to be fully uncollectible. Delinquent accounts are based on contractual terms. We have included in our calculation of our allowance for doubtful accounts, the potential impact of the COVID-19 pandemic on our customers’ businesses and their ability to pay their accounts receivable. We maintain a specific allowance for estimated losses resulting from the inability of certain customers to make required payments. We also consider factors external to the specific customer, including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic. In the event we recover amounts previously written off, we will reduce the specific allowance for credit loss. Our allowance for doubtful accounts was $ 385,000 and $ 648,000 at September 30, 2021 and December 31, 2020, respectively. ​ 8 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ Income Taxes Our effective tax rate is higher than the federal statutory rate as a result of the inclusion of state taxes in the income tax amount. We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Segments We serve twenty-seven radio markets (reporting units) that aggregate into one operating segment (Radio), which also qualifies as a reportable segment. We operate under one 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 (“TBAs”) or Local Marketing Agreements (“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 TBAs/LMAs are included in the accompanying unaudited Condensed Consolidated Statements of Income. Assets and liabilities related to the TBAs/LMAs are included in the accompanying unaudited Condensed Consolidated Balance Sheets. ​ 2. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Incomes Taxes” (“ASU 2019-12”) which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance regarding the tax treatment of certain franchise taxes, goodwill and nontaxable entities, among other items to improve consistent application. ASU 2019-12 is effective for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this standard on January 1, 2021 and there was no material impact as a result of adoption. ​ 9 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ ​ ​ 3. Revenue Nature of goods and services The following is a description of principal activities from which we generate our revenue: Broadcast Advertising Revenue Our primary source of revenue is from the sale of advertising for broadcast on our stations. We recognize revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising; therefore, revenue is recognized at a point in time when each advertising spot is transmitted. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory placed by an agency and are reported as a reduction of advertising revenue. Digital Advertising Revenue We recognize revenue from our digital initiatives across multiple platforms such as targeted digital advertising, online promotions, advertising on our websites, mobile messaging, email marketing and other e-commerce. Revenue is recorded when each specific performance obligation in the digital advertising campaign takes place, typically within a one month period. Other Revenue Other revenue includes revenue from concerts, promotional events, tower rent and other miscellaneous items. Revenue is generally recognized when the event is completed, as the promotional events are completed or as each performance obligation is satisfied. Disaggregation of Revenue Revenues from contracts with customers comprised the following for three and nine months ended September 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ 2021 2020 2021 2020 ​ ​ (in thousands) (in thousands) Types of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Broadcast Advertising Revenue, net ​ $ 24,970 ​ $ 22,124 ​ $ 69,921 ​ $ 61,119 ​ Digital Advertising Revenue ​ 1,984 ​ 845 ​ 4,620 ​ 2,412 ​ Other Revenue ​ 1,891 ​ 1,174 ​ 4,651 ​ 3,529 ​ Net Revenue ​ $ 28,845 ​ $ 24,143 ​ $ 79,192 ​ $ 67,060 ​ ​ Contract Liabilities Payments from our advertisers are generally due within 30 days although certain advertisers are required to pay in advance. When an advertiser pays for the services in advance of the performance obligations these prepayments are recorded as contract liabilities. Typical contract liabilities relate to prepayments for advertising spots not yet run; prepayments from sponsors for events that have not yet been held; and gift cards sold on our websites used to finance a broadcast advertising campaign. Generally all contract liabilities are expected to be recognized within one year and are included in accounts payable in the Company’s Condensed Consolidated Financial Statements and are immaterial. 10 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL 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. ​ 4. Broadcast Licenses, Goodwill and Other Intangible Assets We evaluate our FCC licenses for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. We operate our broadcast licenses in each market as a single asset and determine the fair value by relying on a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are broadcast licenses. The fair value calculation contains assumptions incorporating variables that are based on past experiences and judgments about future operating performance using industry normalized information for an average station within a market. These variables include, but are not limited to: (1) the forecasted growth rate of each radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) the estimated available advertising revenue within the market and the related market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4) 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 surrounding COVID-19, and other potential indicators of impairment and determined a triggering event had not occurred which would necessitate any interim impairment tests during the three and nine months ended September 30, 2021. We will continue to monitor changes in economic and market conditions, including those related to COVID-19, 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 five to twenty-six years . Other intangibles are amortized over one to fifteen years . Customer relationships are amortized over three years . ​ 11 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ 5. Common Stock and Treasury Stock The following summarizes information relating to the number of shares of our common stock issued in connection with stock transactions through September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ Common Stock Issued ​ Class A Class B ​ ​ (Shares in thousands) Balance, January 1, 2020 ​ 6,771 ​ 954 Conversion of shares 16 ( 16 ) Issuance of restricted stock — — Forfeiture of restricted stock ( 2 ) — Balance, December 31, 2020 6,785 938 Balance, September 30, 2021 6,785 938 ​ We have a Stock Buy-Back Program to allow us to purchase up to $ 75.8 million of our Class A Common Stock. As of September 30, 2021, we have remaining authorization of $ 18.8 million for future repurchases of our Class A Common Stock. On September 14, 2017, the Board of Directors authorized the repurchase of our Class A Common Stock under our trading plan adopted pursuant to Securities and Exchange Commission Rule 10b5-1. The Rule 10b5-1 repurchase plan allows us to repurchase our shares during periods when we would normally not be active in the market due to our internal trading blackout periods. Under the plan, we may repurchase our Class A Common Stock in any combination of open market, block transactions and privately negotiated transactions subject to market conditions, legal requirements including applicable SEC regulations (which include certain price, market, volume and timing constraints), specific repurchase instructions and other corporate considerations. Purchases under the plan are funded by cash on our balance sheet. The plan does not obligate us to acquire any particular amount of Class A Common Stock. Our original purchase authorization was effective until September 1, 2018 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 nine months ended September 30, 2021 no shares were repurchased under the Stock Buy-Back Program. During the three and nine months ended September 30, 2020, approximately 1,000 and 2,600 shares, respectively, were repurchased for $ 22,000 and $ 63,000 , respectively, related to 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 more options to renew . The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets are limited to the expected lease term. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. As of September 30, 2021, 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 $ 6.6 million at September 30, 2021 and December 31, 2020 respectively. Lease liabilities were $ 5.8 million and $ 6.9 million at September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021, we recorded additional ROU assets under operating leases of $ 15,000 and $ 58,000 . Payments on lease liabilities during the three and nine months ended September 30, 2021 and 2020 totaled $ 451,000 , $ 1,335,000 , $ 401,000 and $ 858,000 , respectively. 12 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ Lease expense includes cost for leases with terms in excess of one year. For the three and nine months ended September 30, 2021 and 2020, our total lease expense was $ 443,000 , $ 1,325,000 , $ 444,000 and $ 1,310,000 , respectively. Short-term lease costs are de minimus. We have no financing leases and minimum annual rental commitments under non-cancellable operating leases consisted of the following at September 30, 2021 (in thousands): ​ ​ ​ ​ ​ Years Ending December 31, ​ ​ 2021 (a) $ 440 2022 ​ 1,679 2023 ​ 1,358 2024 ​ 1,058 2025 ​ 661 Thereafter ​ 1,579 Total lease payments (b) ​ 6,775 Less: Interest (c) ​ 934 Present value of lease liabilities (d) ​ $ 5,841 ​ (a) Remaining payments are for the three-months ending December 31, 2021 (b) Lease payments include options to extend lease terms that are reasonably certain of being exercised. There were no legally binding minimum lease payments for leases signed but not yet commenced at September 30, 2021. (c) Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date. (d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.2 years and 4.3 % , respectively, at September 30, 2021. ​ ​ ​ ​ ​ ​ 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 acquisitions under the provisions of FASB ASC Topic 805, Business Combinations . Management assigned fair values to the acquired property and equipment through a combination of cost and market approaches based upon each specific asset’s replacement cost, with a provision for depreciation, and to the acquired intangibles, primarily an FCC license, based on the Greenfield valuation methodology, a discounted cash flow approach. 2021 Acquisitions On 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. The translators are start-up stations and therefore, have no pro forma revenue and expenses. ​ 13 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ 2020 Acquisitions On January 2, 2020, the Company closed on an agreement to purchase W295BL from Basic Holdings, LLC, for an aggregate purchase price of $ 200,000 , of which $ 10,000 was paid in 2019 and the remaining $ 190,000 paid in 2020. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Manchester, New Hampshire market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations. The translators are start-up stations and therefore, have no pro forma revenue and expenses. Condensed Consolidated Balance Sheet of 2021 and 2020 Acquisitions: The following unaudited condensed balance sheets represent the estimated fair value assigned to the related assets and liabilities of the 2021 and 2020 acquisitions. Saga Communications, Inc. Condensed Consolidated Balance Sheet of 2021 and 2020 Acquisitions ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisitions in ​ 2021 2020 ​ ​ (In thousands) Assets Acquired: ​ ​ ​ ​ ​ ​ Property and equipment ​ $ 3 $ 11 Other assets: ​ ​ ​ ​ ​ ​ Broadcast licenses ​ 69 ​ 46 Goodwill ​ 103 ​ 143 Total other assets ​ 172 ​ 189 Total assets acquired ​ 175 ​ 200 Liabilities Assumed: ​ ​ ​ ​ ​ ​ Current liabilities ​ — ​ — Total liabilities assumed ​ — ​ — Net assets acquired ​ $ 175 ​ $ 200 ​ ​ 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 $ 1,375,000 was recorded for the three months ended September 30, 2021 compared to $ 1,130,000 for the three months ended September 30, 2020. The effective tax rate was approximately 28.5 % for the three months ended September 30, 2021 compared to 627.8 % for the three months ended September 30, 2020. An income tax expense of $ 3,030,000 was recorded for the nine months ended September 30, 2021 compared to an income tax benefit of $ 1,975,000 for the nine months ended September 30, 2020. The effective tax rate was approximately 28.9 % for the nine months ended September 30, 2021 compared to 32.1 % for the nine months ended September 30, 2020. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. The prior year’s tax rate was impacted by the broadcast license impairment charge which was a discrete item and contributed approximately $ 400,000 and $ 1,500,000 of tax benefit for the three and nine month periods ended September 30, 2020, respectively. ​ 14 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ 9. Stock-Based Compensation 2005 Incentive Compensation Plan On October 16, 2013 our stockholders approved the Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan, which was amended in 2018 after approval of the amendment by our stockholders at our 2018 annual meeting (as amended, the “Second Restated 2005 Plan”). The 2005 Incentive Compensation Plan, which replaced our 2003 Stock Option Plan, was first approved by stockholders in 2005 and subsequently this plan was re-approved by stockholders in 2010. The changes made in 2013 in the Second Restated 2005 Plan (i) increased the number of authorized shares by 233,334 shares of Common Stock, (ii) extended the date for making awards to September 6, 2018, (iii) included directors as participants, (iv) targeted awards according to groupings of participants based on ranges of base salary of employees and/or retainers of directors, (v) required participants to retain 50 % of their net annual restricted stock awards during their employment or service as a director, and (vi) included a clawback provision. The 2018 amendment to the Second Restated 2005 Plan (i) extended the date for making awards to September 6, 2023, and (ii) increased the number of authorized shares under the Plan by 90,000 shares of Class B Common Stock. The Second Restated 2005 Plan allows for the granting of restricted stock, restricted stock units, incentive stock options, nonqualified stock options, and performance awards to eligible employees and non-employee directors. The number of shares of Common Stock that may be issued under the Second Restated 2005 Plan may not exceed 370,000 shares of Class B Common Stock, or 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 370,000 shares of Class A Common Stock issuable upon conversion of Class B Common Stock. Awards denominated in Class A Common Stock may be granted to any employee or director under the Second Restated 2005 Plan. However, awards denominated in Class B Common Stock may only be granted to Edward K. Christian, President, Chief Executive Officer, Chairman of the Board of Directors, and the holder of 100% of the outstanding Class B Common Stock of the Company. Stock options granted under the Second Restated 2005 Plan may be for terms not exceeding ten years from the date of grant and may not be exercised at a price which is less than 100% of the fair market value of shares at the date of grant . Stock-Based Compensation All stock options granted were fully vested and expensed at December 31, 2012; therefore, there was no compensation expense related to stock options for the three and nine months ended September 30, 2021 and 2020, respectively. There were no options granted during 2021 and 2020 and there were no stock options outstanding as of September 30, 2021. All outstanding stock options were exercised in 2017. The following summarizes the restricted stock transactions for the three and nine months ended September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Grant Date ​ ​ ​ ​ Fair ​ Shares Value Outstanding at January 1, 2021 ​ 63,755 ​ $ 32.90 Vested ​ 519 ​ ​ 33.02 Forfeited ​ — ​ ​ — Non-vested and outstanding at September 30, 2021 63,236 $ 32.90 ​ ​ 15 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ For the three and nine months ended September 30, 2021 and 2020, we had $ 348,000 , $ 1,048,000 , $ 618,000 and $ 1,799,000 , 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 nine months ended September 30, 2021 and 2020 was $ 30,000 , $ 94,000 , $ 71,000 and $ 198,000 , respectively. ​ 10. Long-Term Debt Long-term debt consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2021 2020 ​ ​ (In thousands) Revolving credit facility ​ $ 10,000 ​ $ 10,000 Amounts payable within one year ​ ( 10,000 ) ​ — ​ ​ $ — ​ $ 10,000 ​ On August 18, 2015, we entered into a new credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P. Morgan Securities LLC (collectively, the “Lenders”) pursuant to a credit agreement of even date (the “Credit Agreement”). The Credit Facility consists of a $ 100 million five-year revolving facility (the “Revolving Credit Facility”) and originally matured on August 18, 2020 . On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility, (the “Second Amendment”), which had first been amended on September 1, 2017, extending the revolving credit maturity date under the Credit Agreement for five years after the date of the amendment to June 27, 2023 . On July 1, 2019, we elected to reduce our Revolving Credit Facility to $ 70 million. On May 11, 2020, 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. 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 debt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. These debt issuance costs are included in other assets, net in the 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 ( 0.1250 % at September 30, 2021), 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. The Credit Facility contains a number of financial covenants (all of which we were in compliance with at September 30, 2021) 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. 16 Table of Contents SAGA COMMUNICATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ 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, which was presented in the current portion of long-term debt on our balance sheet at September 30, 2021. We had approximately $ 60 million of unused borrowing capacity under the Revolving Credit Facility at September 30, 2021. After we paid down the debt and reduced our Revolving Credit Facility as noted above, we have $ 50 million of unused borrowing capacity at the date of filing this Form 10-Q. ​ ​ 11. Litigation The Company is subject to various outstanding claims which arise in the ordinary course of business and to other legal proceedings. Management anticipates that any potential liability of the Company, which may arise out of or with respect to these matters, will not materially affect the Company’s financial statements. ​ 12. Dividends On September 28, 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 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, 2020 . On June 18, 2020, the Company’s Board of Directors announced that it was temporarily suspending the quarterly cash dividend in response to the continued uncertainty of the ongoing impact of COVID-19. On March 4, 2020 , the Company’s Board of Directors declared a quarterly cash dividend of $ 0.32 per share on its Classes A and B Common Stock. This dividend, totaling approximately $ 1.9 million, was paid on April 10, 2020 to shareholders of record on March 16, 2020 . ​ 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 . We received additional cash proceeds of $ 290,000 in the third quarter, resulting in a gain of $ 290,000 . The total gain of $ 540,000 is recorded in other (income) expense, net, in the Company’s Condensed Consolidated Statements of Income. During the first quarter of 2020, there was weather-related damage to an antenna in our Keene, New Hampshire market. The Company’s insurance policy provided coverage for removal and replacement of the antenna and related equipment. The insurance settlement was finalized during the first quarter of 2020 and the Company received cash proceeds of $ 208,000 , resulting in a gain of $ 208,000 . The gain is recorded in other (income) expense, net, in the Company’s Condensed Consolidated Statements of Income. ​ During the first quarter of 2020, the Company sold land and a building on one of its tower sites in its Bellingham, Washington market for approximately $ 1,700,000 to Talbot Real Estate, LLC, resulting in a $ 1,400,000 gain on the sale of assets. The gain is recorded in the other operating (income) expense, net in the Company’s Condensed Consolidated Statements of Income. ​ ​ 17 Table of Contents