What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-16 compared with 2021-03-16 · 70 added, 101 removed, 244 unchanged (41% of the section changed)

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The following discussion should be read in conjunction with Item 1.

Business, Item 6.

Selected Financial Data and the consolidated financial statements and notes thereto of Saga Communications, Inc.

Business and the consolidated financial statements and notes thereto of Saga Communications, Inc.

and its subsidiaries contained elsewhere herein.

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COVID-19 Impact and Response

We have experienced significant volatility in market conditions during 2020.

On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide that have had a significant economic impact that continues through the date of this report.

The numerous state and local governments “shelter-in-place” orders that were issued in the first part of the year, materially impacted and restricted various aspects of our business.

While these “shelter-in-place” orders have been lifted, there have been varying degrees to which the economy has reopened in each state.

Our broadcast revenue has been significantly negatively impacted in the majority of states where we operate.

We continued to experience a number of cancellations of advertising on our stations, especially regarding events, venues, sports, high ticket items, healthcare and automotive sales throughout 2020.

Our sales teams are focused on how to meet changing needs of our customers in this environment.

We are investing in training our salespeople using a variety of different programs.

We have been successful at creating fresh, innovative and effective new advertising which has helped generate business for a number of our customers so that they are better positioned to remain open.

Our operations are functioning, subject to regulated restrictions and safety constraints we have enacted in order to protect our employees and customers.

In response to the pandemic, we instituted the following actions in March 2020 and some still remain in place through the date of this report:

Placed restrictions on business travel for our employees and imposed mandatory quarantine periods for employees who traveled to areas impacted by the pandemic;

Closed our stations to the general public and shifted to appointment-only interactions with our customers where permitted, following recommended distancing and other health and safety protocols when meeting in person with a customer;

Modified our corporate and station office functions in order to allow certain of our employees to work remotely, when necessary, except for essential minimum basic operations which could only be done in an office or studio setting;

The severity of governmental restrictions and the date we resumed more normal operations varied by market during the second quarter and third quarter based on the reduction in restrictions under “shelter-in-place” orders and improved public health conditions.

While all of the above-referenced steps were, and some remain, necessary and appropriate in light of the COVID-19 pandemic, they impacted our ability to operate our business in its ordinary and traditional course.

Those restrictions, combined with a reduction in the advertising abilities of our customers, which in each case has varied by market depending on the scope of the restrictions local authorities have established, have tempered our sales pace in the latter part of March and through the date of this report.

The potential magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19 are uncertain and include, among other things, significant volatility in financial markets.

In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period.

As a result of the current challenging economic conditions, our reported results for the year ended December 31, 2020 are not reflective of current market conditions.

We began the year under positive conditions however our operating income for the year ended December 31, 2020 decreased by $20,057,000, over the prior year.

Advertising spending has significantly declined as a result of the disruptions to business activity in the markets where we operate due to the pandemic.

This decline in advertising spending is causing our revenue and related net income to significantly decline.

We have however seen some increase in revenue from a low point in the second quarter of 2020, although not to levels expected prior to the pandemic.

While this disruption is currently expected to be temporary, there is considerable uncertainty around the duration.

Thus, it is impossible to predict the total impact that it will have on the Company.

Although we have undertaken a number of steps to reduce costs, such cost control measures will not completely offset the declines in revenue.

The extent to which these revenue conditions will persist is difficult to predict, given the uncertainty around further restrictive measures by governmental authorities and the duration of those actions.

As the pandemic spread and government and business responses expanded, we focused on protecting our liquidity and closely managing our cash flows, including taking the following actions:

Delaying capital expenditures where practical,

Suspending the repurchase of shares under our share repurchase program,

Temporarily suspending our quarterly dividend beginning in the second quarter,

Implementing a series of initiatives to control or reduce costs,

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

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

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

While we cannot reasonably estimate the length or severity of this pandemic, an extended economic slowdown in the U.S.

could materially impact our consolidated financial position, consolidated results of operations, and consolidated cash flows in fiscal 2021 or beyond.

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected business, economies and financial markets worldwide.

During 2021, the effects of the COVID-19 pandemic and related actions by governments to attempt to contain the spread of the virus have continued to impact our business.

Despite the development of vaccines and more effective treatments for the physical impacts of COVID-19, there are no reliable estimates of how long the COVID-19 pandemic, and its negative effect on our business, will last.

Therefore, the unpredictability of the current economic and public health conditions continues.

However, all of our markets are functioning at effectively full capacity, subject to ongoing health and safety protocols, which vary from state-to-state and we have continued to increase the number of our non-spot events again.

As we exit 2021, we remain optimistic about future advertising revenue.

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties.

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Radio Stations

Our radio station’s primary source of revenue is from the sale of advertising for broadcast on our stations.

Our radio stations’ primary source of revenue is from the sale of advertising for broadcast on our stations.

Depending on the format of a particular radio station, there are a predetermined number of advertisements available to be broadcast each hour.

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The majority of our revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff.

For the years ended December 31, 2020, 2019 and 2018, approximately 84%, 88% and 87%, respectively, of our radio station’s gross revenue was from local advertising.

For the years ended December 31, 2021, 2020 and 2019, approximately 89%, 84% and 88%, respectively, of our radio stations’ 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.

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Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year.

Political revenue significantly increased in 2020 and 2018 due to the decreased number of national, state, and local elections in most of our markets as compared to 2019.

We expect political revenue in 2021 to decline over 2020 levels as a result of very few elections in 2021.

Political revenue was significantly lower in 2021 and 2019 due to the decreased number of national, state, and local elections in most of our markets as compared to 2020.

Our gross political revenue for the years ended December 31, 2021, 2020 and 2019 was $1,780,000, $6,890,000 and $885,000, respectively.

We expect political revenue in 2022 to increase over 2021 levels as a result of more elections in 2022 at the local, state and national levels.

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 and the available radio advertising revenue in that particular market.

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We continue to create opportunities through targeted digital advertising and an array of digital services that include online promotions, mobile messaging, and email marketing.

During the years ended December 31, 2020, 2019 and 2018, our Charleston, South Carolina;

Columbus, Ohio;

During the years ended December 31, 2021, 2020 and 2019, our Columbus, Ohio;

Des Moines, Iowa;

Milwaukee, Wisconsin and Norfolk, Virginia markets, when combined, represented approximately 39%, 39%, and 41%, respectively, of our consolidated net operating revenue.

Milwaukee, Wisconsin, Norfolk, Virginia and Portland, Maine markets, when combined, represented approximately 39%, 40%, and 39%, respectively, of our consolidated net operating revenue.

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

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Ended December 31,

Charleston, South Carolina

Columbus, Ohio

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Norfolk, Virginia

Portland, Maine

During the years ended December 31, 2021, 2020 and 2019, the radio stations in our five largest markets when combined, represented approximately 43%, 52% and 44%, respectively, of our consolidated station operating income.

We note that the percent of consolidated station operating income at December 31, 2020 is higher than normal due to the impact of the COVID-19 pandemic on our markets.

As the pandemic is resolved, we would anticipate results by market to continue to be back to normalized amounts in future years.

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

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for the Years Ended

Charleston, South Carolina

Columbus, Ohio

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Norfolk, Virginia

Portland, Maine

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

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N/M = Not Meaningful

Year Ended year ended December 31, 2020 Compared to Year Ended December 31, 2019

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

For the year ended December 31, 2021, consolidated net operating revenue was $108,343,000 compared with $95,813,000 for the year ended December 31, 2020, an increase of $12,530,000 or 13.1%.

The increase in revenue in 2021 was attributable to lower-than-normal revenue in 2020 due to the COVID-19 pandemic.

We had increases in gross local revenue of $12,209,000, gross interactive revenue of $2,921,000, non-spot gross revenue of $1,484,000, gross national revenue (excluding national political revenue) of $819,000, and gross barter revenue of $236,000 partially offset by a decrease in gross political revenue of $5,104,000 from 2020.

The increase in gross local, gross national and gross barter revenue occurred in the majority of our markets as a result of the impact of the COVID-19 pandemic and the disruption to our advertisers’ businesses in 2020, in contrast with the economic recovery that has begun to take place in 2021.

The increase in gross interactive revenue was primarily due to an increase in our streaming and website content revenue.

The increase in non-spot gross revenue was primarily due to us starting to host events again in 2021, whereas the number of events being held in 2020 due to the COVID-19 pandemic was relatively very few.

The decrease in gross political revenue was due to fewer national, state and local elections in 2021 versus 2020 in the majority of our markets.

Station operating expense was $83,245,000 for the year ended December 31, 2021, compared with $81,586,000 for the year ended December 31, 2020, an increase of $1,659,000 or 2.0%.

The increase in operating expenses was primarily a result of increases in sales rating survey expenses, commission expense, barter expenses, interactive services expenses, healthcare costs and promotional expenses of $1,836,000, $1,035,000, $362,000, $331,000, $210,000, and $173,000, respectively, partially offset by decreases in compensation related expenses, depreciation and amortization expenses, and bad debt expense of $1,698,000, $754,000 and $364,000, respectively, from 2020.

We had operating income for the year ended December 31, 2021 of $15,051,000 compared to an operating loss of $1,249,000 for the year ended December 31, 2020, an increase of $16,300,000.

The increase was a result of the increase in net operating revenue partially offset by the increase in station operating expense, described above, a non-cash impairment charge of $5,149,000 in 2020 versus no impairment charge in 2021, and a decrease in our corporate general and administrative expenses of $1,534,000 or 13.3%, offset by a decrease in other operating income of $1,254,000 due to a gain on the sale of land and a building at one of our tower sites in Bellingham, Washington for $1,400,000 in 2020.

The decrease in corporate general and administrative expenses was primarily attributable to decreases in non-cash compensation related expenses, legal expenses, and contribution expenses of $886,000, $323,000, and $158,000 respectively.

We generated net income of $11,157,000 ($1.85 per share on a fully diluted basis) during the year ended December 31, 2021, compared to a net loss of $1,913,000 ($ (0.32) per share on a fully diluted basis) for the year ended December 31, 2020, an increase of $13,070,000.

The increase in net income is due to the increase of operating income, described above, a decrease in interest expense of $56,000 and an increase in other income of $401,000, partially offset by an increase in income taxes of $3,555,000, and a decrease in interest income of $132,000.

The decrease in interest expense is due to the decrease in our debt outstanding partially offset by an increase in our interest rates.

The increase in other income is primarily due to insurance proceeds for weather-related damages.

The increase in our income tax expense is due to the increase in income before income taxes.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

For the year ended December 31, 2020, consolidated net operating revenue was $95,813,000 compared with $123,072,000 for the year ended December 31, 2019, a decrease of $27,259,000 or 22.1%.

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The decrease was a result of the decrease in net operating revenue partially offset by the decrease in station operating expense, described above, and a non-cash impairment charge of $5,149,000, and an increase in our corporate general and administrative expenses of $114,000 or 1.0%, offset by an increase in other operating income of $1,359,000 due to a gain on the sale of land and a building at one of our tower sites in Bellingham, Washington for $1,400,000.

The increase in corporate general and administrative expenses was primarily attributable to increases in legal expenses, contribution expenses, non-cash compensation related expenses, insurance expenses of $364,000, $151,000, $91,000, $72,000 respectively, partially offset by decreases in franchise tax expenses and travel related expenses of $321,000 and $199,000 respectively.

The increase in corporate general and administrative expenses was primarily attributable to increases in legal expenses, contribution expenses, non-cash compensation related expenses, and insurance expenses of $364,000, $151,000, $91,000, $72,000, respectively, partially offset by decreases in franchise tax expenses and travel-related expenses of $321,000 and $199,000, respectively.

We generated a net loss of $1,913,000 ($(0.32) per share on a fully diluted basis) during the year ended December 31, 2020, compared to net income of $13,279,000 ($2.23 per share on a fully diluted basis) for the year ended December 31, 2019, a decrease of $15,192,000.

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The decrease in our income tax expense is due to the decrease in income before income taxes.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

For the year ended December 31, 2019, consolidated net operating revenue was $123,072,000 compared with $124,829,000 for the year ended December 31, 2018, a decrease of $1,757,000 or 1.4%.

We had an increase of approximately $4,210,000 that was attributable to stations that we did not own or operate for the entire comparable period, and a decrease of $5,967,000 generated by stations we owned or operated for the comparable period in 2018 (“same station”).

The decrease in same station revenue was primarily the result of decreases in gross local revenue of $3,373,000, gross political revenue of $1,987,000 and gross national revenue of $1,321,000 from 2018 partially offset by an increase in gross non-spot revenue of $649,000 and a decrease in agency commissions of $645,000.

The decrease in gross local revenue is due to decreases in our Brattleboro, Vermont;

Champaign, Illinois;

Charlottesville, Virginia;

and Des Moines, Iowa markets.

The decrease in gross political revenue was due to a lower number of national, state and local elections in our Bellingham, Washington;

Columbus, Ohio;

and Milwaukee, Wisconsin markets.

The decrease in gross national revenue is due to decreases in our Champaign, Illinois;

Charleston, South Carolina;

Milwaukee, Wisconsin and Norfolk, Virginia markets.

The increase in gross non-spot revenue is due to increases in our Champaign, Illinois;

Columbus, Ohio;

and Ithaca, New York markets.

The decrease in agency commissions was due to lower local agency revenue.

Station operating expense was $92,692,000 for the year ended December 31, 2019, compared with $93,727,000 for the year ended December 31, 2018, a decrease of $1,035,000 or 1.1%.

We had an increase of approximately $3,653,000 that was attributable to stations that we did not own or operate for the entire comparable period, and a decrease of approximately $4,688,000 generated by stations we owned or operated for the comparable period in 2018.

The decrease is primarily attributable to a decrease in healthcare costs of $1,358,000, a decrease in compensation related costs of $1,121,000, a decrease in local commission expense of $758,000, a decrease in amortization expenses of $402,000 related to intangible assets, a decrease of $267,000 in national rep commissions, a decrease in trade expense of $266,000 and a decrease of $201,000 in music license fees.

Operating income for the year ended December 31, 2019 was $18,808,000 compared to $19,682,000 for the year ended December 31, 2018, a decrease of $874,000 or 4.4%.

The decrease was a result of the decrease in net operating revenue partially offset by the decrease in station operating expense, described above, an increase in our corporate general and administrative expenses of $101,000 or less than 1%, and an increase in other operating expense of $51,000 from 2018.

We generated net income of $13,279,000 ($2.23 per share on a fully diluted basis) during the year ended December 31, 2019, compared to $13,690,000 ($2.30 per share on a fully diluted basis) for the year ended December 31, 2018, a decrease of $411,000 or 3%.

The decrease in net income is due to the decrease of operating income, described above, a decrease in interest income of $21,000, and a decrease in other income of $7,000 offset by a decrease in income taxes of $280,000 and a decrease in interest expense of $211,000.

The decrease in interest expense is due to the decrease in our debt outstanding partially offset by an increase in our interest rates.

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 JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P.

Morgan Securities LLC.

The Credit Facility consists of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and originally matured on August 18, 2020.

On August 18, 2015, we entered into a 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”).

The Credit Facility consisted 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 we entered into an assumption agreement and amendment of loan documents as part of our reincorporation as a Florida corporation.

The amendment also includes an alternative benchmark rate as a replacement to LIBOR.

A copy of this assumption agreement and amendment was filed as Exhibit 10(v) to our Form 10-Q for the quarter ended June 30, 2020 and incorporated by reference in our Form 10-K.

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 1, 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.

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The Credit Facility contains a number of financial covenants (all of which we were in compliance with at December 31, 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.

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.

On June 7, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility.

On February 4, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility, which was presented in the current portion of long-term debt in our balance sheet at December 31, 2018.

We had approximately $60 million of unused borrowing capacity under the Revolving Credit Facility at December 31, 2020.

After we paid down our debt and reduced our Revolving Credit Facility as noted above, we had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at December 31, 2021.

Sources and Uses of Cash

During the years ended December 31, 2021, 2020 and 2019, we had net cash flows from operating activities of $19,104,000, $12,088,000 and $25,335,000, respectively.

We believe that cash flow from operations will be sufficient to meet quarterly debt service requirements for interest and scheduled payments of principal under the Credit Facility.

We believe that cash flow from operations will be sufficient to meet any quarterly debt service requirements for interest and scheduled payments of principal under the Credit 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.

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From its inception in 1998 through December 31, 2021, we have repurchased 2.2 million shares of our Class A Common Stock for $57 million.

During the year ended December 31, 2020, approximately 800 shares were repurchased for $20,000 under our stock buy-back program and 23,500 shares were retained for payment of withholding taxes for $429,000 related to the vesting of restricted stock.

During the year ended December 31, 2021, approximately 16,600 shares were retained for payment of withholding taxes for $435,000 related to the vesting of restricted stock.

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.

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We anticipate capital expenditures in 2022 to be approximately $5.5 million to $6.0 million, which we expect to finance through funds generated from operations.

On January 2, 2020, we closed on an agreement to purchase W295BL from Basic Holdings, LLC, for an aggregate purchase price of $200 thousand, of which $10 thousand was paid in 2019 and the remaining $190 thousand paid in 2020.

On January 8, 2021, we 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 January 2, 2020, we 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.

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The gain is recorded in the other operating (income) expense, net in the Company’s Consolidated Statements of Income.

On January 9, 2019, we closed on an agreement to purchase WPVQ-AM and W222CH from County Broadcasting Company, LLC for an aggregate purchase price of $210 thousand using funds generated from operations.

On January 9, 2019, we closed on an agreement to purchase WPVQ-AM and W222CH from County Broadcasting Company, LLC for an aggregate purchase price of $210,000 using funds generated from operations.

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.

On October 29, 2018, we entered into an agreement to purchase WOGK-FM, WNDT-FM, WNDD-FM and WNDN-FM, from Ocala Broadcasting Corporation.

The Company closed this transaction effective December 31, 2018 using funds generated from operations of $9.84 million, which included the purchase price of $9.3 million, the purchase of $566 thousand in accounts receivable by certain closing adjustments and transactional costs of approximately $25 thousand, of which $553 thousand was paid in January 2019.

On December 14, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share and special cash dividend of $0.50 per share on its Classes A and B Common Stock.

This dividend, totaling approximately $3,988,000, was paid on January 14, 2022 to shareholders of record on December 27, 2021 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at December 31, 2021.

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, 2021 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at June 30, 2021.

The Company had previously temporarily suspended the quarterly cash dividend in response to the uncertainty of the ongoing impact of COVID-19 as of June 18, 2020.

On March 4, 2020, our Board of Directors declared a regular cash dividend of $0.32 per share on its Classes A and B Common Stock.

This dividend, totaling approximately $1.9 million, was paid on April 10, 2020 to shareholders of record on March 16, 2020 and funded by cash on the Company’s balance sheet.

On December 11, 2019, our Board of Directors declared a quarterly cash dividend of $0.30 per share on its Classes A and B shares.

On December 11, 2019, our Board of Directors declared a quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock.

This dividend totaling approximately $1.8 million was paid on January 17, 2020 to shareholders of record on December 27, 2019 and funded by cash on the Company’s balance sheet.

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This dividend, totaling approximately $1.8 million, was paid on March 29, 2019 to shareholders of record on March 12, 2019 and funded by cash on the Company’s balance sheet.

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.

On June 7, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of its Revolving Credit Facility.

On February 4, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of its Revolving Credit Facility which was presented in the current portion of long-term debt in our balance sheet at December 31, 2018.

On February 4, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of its Revolving Credit Facility.

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, additional debt or equity financing, or a combination thereof.

We anticipate that any future acquisitions of radio stations and dividend payments will be financed through funds generated from operations, borrowings under the Credit Agreement, additional debt or equity financing, or a combination thereof.

However, there can be no assurances that any such financing will be available on acceptable terms, if at all.

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(In thousands)

Long-Term Debt Obligations(1)

Interest Payments on Long-Term Debt(1)

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Total Contractual Cash Obligations

(1) Under our Credit Facility, the maturity on outstanding debt of $10 million could be accelerated if we do not maintain certain covenants.

(See Note 4 of the Notes to Consolidated Financial Statements).

(2) Interest payments on the long-term debt are based on scheduled debt maturities and the interest rates are held constant over the remaining terms.

(1) Interest payments on our Credit Facility are based on unused commitment of the credit facility and scheduled debt maturities, if we were to borrow in the future and the interest rates are held constant over the remaining terms.

(2) Includes $12,818,000 in obligations under employment agreements and contracts with on-air personalities, other employees, and our President, CEO, and Chairman, Edward K.

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We conduct the impairment testing of broadcast licenses and goodwill annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

During 2020, we have recognized a $5,149,000 impairment charge ($1,392,000 in the third quarter of 2020 and $3,757,000 in the second quarter of 2020) for broadcast license due to a decrease in projected revenue in the markets listed below due to the impact of the COVID-19 pandemic , an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market.

We are starting to see increased revenue from our low point in the second quarter of 2020, however, they are not at the previously expected recovery rate.

There was no impairment of broadcast licenses in 2021.

During 2020, we recognized a $5,149,000 impairment charge ($1,392,000 in the third quarter of 2020 and $3,757,000 in the second quarter of 2020) for broadcast license due to a decrease in projected revenue in the markets listed below due to the impact of the COVID-19 pandemic, an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market.

We were starting to see increased revenue from our low point in the second quarter of 2020, however, they were not at the previously expected recovery rate.

Our third quarter 2020 impairment charge related to our Bellingham, Washington;

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Please refer to Note 3 — Broadcast Licenses, Goodwill and Other Intangible Assets, in the accompanying notes to the consolidated financial statements for a discussion of several key assumptions used in the fair value estimate of our broadcast licenses during 2020 impairment tests.

There was no impairment of broadcast licenses in 2019 or 2018.

There was no impairment of broadcast licenses in 2019.

We believe our estimate of the value of our broadcast licenses is a critical accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses assumptions that incorporate variables based on past experiences and judgments about future operating performance of our stations.

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Changes in our estimates of the fair value of these assets could result in material future period write-downs in the carrying value of our broadcast licenses.

For illustrative purposes only, during our 2020 impairment tests had the fair values of each of our broadcasting licenses been lower by 10%, we would have recorded an additional broadcast license impairment of approximately $4.8 - 5.1 million;

For illustrative purposes only, during our 2021 impairment test had the fair values of each of our broadcasting licenses been lower by 10%, we would have recorded an additional broadcast license impairment of approximately $284,000;

had the fair values of each of our broadcasting licenses been lower by 20%, we would have recorded an additional broadcast license impairment of approximately $4.9 million;

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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.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis