SAGA COMMUNICATIONS INC 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with Item 1. Business and the consolidated financial statements and notes thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere herein. The following discussion is presented on a consolidated basis. 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 busines segment for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance. Corporate general and administrative expenses, interest expense, write-off debt issuance costs, other (income) expense, and income tax provision are managed on a consolidated basis. The discussion of our operating performance focuses on station operating income because we manage our stations primarily on station operating income. Operating performance is evaluated for each individual market. 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. COVID-19 Impact and Response 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. 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. ​ 32 Table of Contents Radio 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. Most advertising contracts are short-term and generally run for a few weeks only. The majority of our revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff. For the 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. 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. 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. The broadcasting industry and advertising in general is influenced by the state of the overall economy, including unemployment rates, inflation, energy prices and consumer interest rates. Our stations broadcast primarily in small to midsize markets. Historically, these markets have been more stable than major metropolitan markets during downturns in advertising spending, but may not experience increases in such spending as significant as those in major metropolitan markets in periods of economic improvement. Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers. In a number of our markets, this is measured by periodic reports generated by independent national rating services. In the remainder of our markets it is measured by the results advertisers obtain through the actual running of an advertising schedule. Advertisers measure these results based on increased demand for their goods or services and/or actual revenues generated from such demand. Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media, and signal strength. When we acquire and/or begin to operate a station or group of stations we generally increase programming and advertising and promotion expenses to increase our share of our target demographic audience. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years. During periods of economic downturns, or when the level of advertising spending is flat or down across the industry, this strategy may result in the appearance that our cost of operations are 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 by 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 the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of inventory sell out ratios and pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory. 33 Table of Contents 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 multiple platforms. Our goal is to allow our listeners to connect with our brands on demand wherever, however, and whenever they 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. During the years ended December 31, 2021, 2020 and 2019, our Columbus, Ohio; Des Moines, Iowa; 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. The following tables describe the percentage of our consolidated net operating revenue represented by each of these markets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of Consolidated ​ ​ Net Operating Revenue ​ ​ for the Years ​ ​ Ended December 31, ​ 2021 2020 2019 Market: ​ Columbus, Ohio 10 % 10 % 11 % Des Moines, Iowa 6 % 7 % 6 % Milwaukee, Wisconsin 11 % 11 % 11 % Norfolk, Virginia 6 % 6 % 6 % Portland, Maine 6 % 6 % 5 % ​ ​ 34 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of Consolidated ​ ​ ​ Station Operating Income(*) ​ ​ ​ for the Years Ended ​ ​ ​ December 31, ​ ​ 2021 2020 2019 Market: ​ ​ Columbus, Ohio ​ 12 % 16 % 15 % Des Moines, Iowa ​ 5 % 7 % 6 % Milwaukee, Wisconsin ​ 12 % 15 % 12 % Norfolk, Virginia ​ 7 % 6 % 6 % Portland, Maine ​ 7 % 8 % 5 % (*) Operating income plus corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets. 35 Table of Contents Results of Operations The following tables summarize our results of operations for the three years ended December 31, 2021, 2020 and 2019. Consolidated Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 vs. 2020 ​ 2020 vs. 2019 ​ ​ Years Ended December 31, ​ $ Increase ​ % Increase ​ $ Increase ​ % Increase ​ 2021 2020 2019 (Decrease) (Decrease) (Decrease) (Decrease) ​ ​ (In thousands, except %’s and per share information) Net operating revenue $ 108,343 $ 95,813 $ 123,072 $ 12,530 13.1 % $ (27,259) (22.1) % Station operating expense ​ 83,245 ​ 81,586 ​ 92,692 ​ 1,659 2.0 % (11,106) (12.0) % Corporate general and administrative ​ 10,040 ​ 11,574 ​ 11,460 ​ (1,534) (13.3) % 114 1.0 % Other operating (income) expense, net ​ 7 ​ (1,247) ​ 112 ​ 1,254 N/M ​ (1,359) N/M ​ Impairment of intangible assets ​ — ​ 5,149 ​ — ​ (5,149) N/M ​ 5,149 N/M ​ Operating income (loss) ​ 15,051 ​ (1,249) ​ 18,808 ​ 16,300 N/M ​ (20,057) N/M ​ Interest expense ​ 284 ​ 340 ​ 735 ​ (56) (16.5) % (395) (53.7) % Interest income ​ (16) ​ (148) ​ (610) ​ 132 (89.2) % 462 N/M ​ Other income ​ (634) ​ (233) ​ (16) ​ (401) N/M ​ (217) N/M ​ Income (loss) before income tax expense ​ 15,417 ​ (1,208) ​ 18,699 ​ 16,625 N/M ​ (19,907) (106.5) % Income tax provision ​ 4,260 ​ 705 ​ 5,420 ​ 3,555 504.3 % (4,715) N/M ​ Net income (loss) ​ $ 11,157 ​ $ (1,913) ​ $ 13,279 ​ $ 13,070 N/M ​ $ (15,192) N/M ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per share (diluted) ​ $ 1.85 ​ $ (0.32) ​ $ 2.23 ​ $ 2.17 N/M ​ $ (2.55) (114.3) % ​ N/M = Not Meaningful ​ 36 Table of Contents 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. ​ 37 Table of Contents 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%. The decrease in revenue was primarily due to the COVID-19 pandemic and various governmental shutdowns within the markets that we operate and the country as a whole. We had decreases in gross local revenue of $27,048,000, gross national revenue (excluding national political revenue) of $4,197,000, non-spot gross revenue of $1,991,000, and gross barter revenue of $1,670,000 partially offset by an increase in gross political revenue of $5,996,000 and a decrease in agency commissions of $2,204,000 from 2019. The decrease in gross local, national and barter revenue was at the majority of our markets. The decrease in non-spot gross revenue was primarily due to the decreases in the number of events being held due to the COVID-19 pandemic. The increase in gross political revenue was due to more national, state and local elections in 2020 versus 2019, specifically in our Charleston, South Carolina; Des Moines, Iowa; Milwaukee, Wisconsin and Portland, Maine markets. The decrease in agency commissions was due the decrease in gross revenue. Station operating expense was $81,586,000 for the year ended December 31, 2020, compared with $92,692,000 for the year ended December 31, 2019, a decrease of $11,106,000 or 12.0%. The decrease in operating expenses was primarily a result of decreases in commission expense, sales ratings survey expenses, compensation related expenses, barter expenses, music licensing fees, advertising and promotional expenses, payroll tax related expenses, travel expenses and overall expense reduction of $2,727,000, $2,640,000, $2,283,000, $1,603,000, $575,000, $562,000, $463,000, $257,000 and $987,000, respectively, partially offset by an increase in healthcare costs of $991,000 from 2019. We had an operating loss for the year ended December 31, 2020 of $1,249,000 compared to operating income of $18,808,000 for the year ended December 31, 2019, a decrease of $20,057,000. 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, 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. The decrease in net income is due to the decrease of operating income, described above, a decrease in interest income of $462,000, partially offset by a decrease in income taxes of $4,715,000, a decrease in interest expense of $395,000 and an increase in other income of $217,000 due to insurance proceeds for weather-related damages. The decrease in interest expense is due to the decrease in our debt outstanding partially offset by an increase in our interest rates. The decrease in our income tax expense is due to the decrease in income before income taxes. ​ 38 Table of Contents Liquidity and Capital Resources Debt Arrangements and Debt Service Requirements 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, 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. 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 (0.101% at December 31, 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 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 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. 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. ​ 39 Table of Contents 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 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. 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 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, 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. Our capital expenditures, exclusive of acquisitions, for the year ended December 31, 2021 were $3,969,000 ($2,314,000 in 2020). 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 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. On March 31, 2020, we sold land and a building in our 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 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 $210,000 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 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. ​ 40 Table of Contents 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 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. On September 12, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on October 11, 2019 to shareholders of record on September 23, 2019 and funded by cash on the Company’s balance sheet. On May 30, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on July 5, 2019 to shareholders of record on June 14, 2019 and funded by cash on the Company’s balance sheet. On February 26, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on 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. 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 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. 41 Table of Contents Summary Disclosures About Contractual Obligations 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. The following table reflects a summary of our contractual cash obligations and other commercial commitments as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due By Period ​ ​ ​ ​ ​ Less Than ​ ​ ​ ​ ​ ​ ​ More Than Contractual Obligations: Total 1 Year 1 to 3 Years 4 to 5 Years 5 Years ​ ​ (In thousands) Interest Payments on Long-Term Debt(1) ​ $ 171 ​ $ 115 ​ $ 56 ​ $ — ​ $ — Operating Leases ​ 7,414 ​ 1,778 ​ 2,850 ​ 1,543 ​ 1,243 Purchase Obligations(2) ​ 22,622 ​ 11,638 ​ 9,628 ​ 1,356 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Contractual Cash Obligations ​ $ 30,207 ​ $ 13,531 ​ $ 12,534 ​ $ 2,899 ​ $ 1,243 (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. Christian. We anticipate that the above contractual cash obligations will be financed through funds generated from operations or additional borrowings under our 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, including estimates related to the following: Revenue Recognition: Revenue from the sale of commercial broadcast time to advertisers is recognized when commercials are broadcast. Revenue is reported net of advertising agency commissions. Agency commissions, when applicable, are based on a stated percentage applied to gross billing. All revenue is recognized in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Topic 13, Revenue Recognition Revised and Updated and the Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers . ​ 42 Table of Contents Carrying Value of Accounts Receivable and Related Allowance for Doubtful Accounts: We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us (e.g., bankruptcy filings, credit history, COVID-19 potential impact on our customers’ business, etc.), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past loss history and the length of time the receivables are past due, ranging from 50% for amounts 90 days outstanding to 100% for amounts over 120 days outstanding. If our evaluations of the collectability of our accounts receivable differ from actual results, additional bad debt expense and allowances may be required. Our historical estimates have been a reliable method to estimate future allowances and our reserves have averaged approximately 2-5% of our outstanding receivables. The effect of an increase in our allowance of 1% of our outstanding receivables as of December 31, 2021, from 3.2% to 4.2% or from $469,000 to $614,000, would result in a decrease in net income of $105,000, net of taxes for the year ended December 31, 2021 . In the event we recover amounts previously written off, we will reduce the specific allowance for credit loss. Purchase Accounting: We account for our acquisitions under the purchase method of accounting. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values as of the acquisition date. The excess of consideration paid over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair values of the net assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Broadcast Licenses and Goodwill: As of December 31, 2021, we have recorded approximately $90,277,000 in broadcast licenses and $19,209,000 in goodwill, which represents 44% of our total assets. In assessing the recoverability of these assets, we must conduct impairment testing and charge to operations an impairment expense only in the periods in which the carrying value of these assets is more than their fair value. We 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. 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; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Mitchell, North Dakota; Spencer, Iowa and Springfield, Illinois markets. Our second quarter 2020 impairment charge related to our Bucyrus, Ohio; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Hilton Head, South Carolina; Mitchell, South Dakota; and Ocala, Florida markets. We also reviewed our value of goodwill and other long-lived assets as of June 30, 2020 and September 30, 2020, noting no impairment in goodwill or other long-lived assets. Please refer to Note 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. ​ 43 Table of Contents ​ ​ We believe our estimate of the value of our broadcast licenses is a critical accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses assumptions that incorporate variables based on past experiences and judgments about future operating performance of our stations. These variables include but are not limited to: (1) the forecast growth rate of each radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. Changes in our estimates of the fair value of these assets could result in material future period write-downs in the carrying value of our broadcast licenses. For illustrative purposes only, 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; and had the fair value of our broadcasting licenses been lower by 30%, we would have recorded an additional broadcast license impairment of approximately $12.6 million. ​ Stock Based Compensation: We use a Black-Scholes valuation model to estimate the fair value of stock option awards. Under the fair value method, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Determining the fair value of share-based awards at grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors. If actual results differ significantly from these assumptions, then stock-based compensation expense may differ materially in the future from that previously recorded. The fair value of restricted stock awards is determined based on the closing market price of the Company’s Class A Common Stock on the grant date and is adjusted at each reporting date based on the amount of shares ultimately expected to vest. We had no stock options outstanding at December 31, 2021 or 2020. Litigation and Contingencies: On an ongoing basis, we evaluate our exposure related to litigation and contingencies and record a liability when available information indicates that a liability is probable and estimable. We also disclose significant matters that are reasonably possible to result in a loss or are probable but not estimable. Market Risk and Risk Management Policies Our earnings are affected by changes in short-term interest rates as a result of our long-term debt arrangements. If market interest rates averaged 1% more in 2021 than they did during 2021, our interest expense would increase, and income before taxes would decrease by $82,000. These amounts are determined by considering the impact of the hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our financial structure. 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. Recent Accounting Pronouncements Recent accounting pronouncements are described in Note 1 to the accompanying financial statements. 44 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Information appearing under the caption “Market Risk and Risk Management Policies” in Item 7 is hereby incorporated by reference. Item 8. Financial Statements and Supplementary Data The financial statements attached hereto are filed as part of this annual report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.