What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-06 · 90 added, 32 removed, 196 unchanged (38% of the section changed)

58 unchanged sentences

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

For the three months ended March 31, 2022 and 2021, approximately 91% and 89%, respectively, of our radio stations’ gross revenue was from local advertising.

For the six months ended June 30, 2022 and 2021, approximately 90% and 89%, 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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Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years.

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 is increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired station or group of stations.

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 is increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired station or group of stations.

The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by the format of a particular radio station.

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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 three months ended March 31, 2022 and 2021 and the years ended December 31, 2021 and 2020, our Columbus, Ohio;

During the six months ended June 30, 2022 and 2021 and the years ended December 31, 2021 and 2020, our Columbus, Ohio;

Des Moines, Iowa;

7 unchanged sentences

Net Operating Revenue

the Three Months Ended

the Six Months Ended

for the Years Ended

4 unchanged sentences

Portland, Maine

During the three months ended March 31, 2022 and 2021 and the years ended December 31, 2021 and 2020, the radio stations in our five largest markets, when combined, represented approximately 44%, 41%, 43% and 52%, respectively, of our consolidated station operating income.

During the six months ended June 30, 2022 and 2021 and the years ended December 31, 2021 and 2020, the radio stations in our five largest markets, when combined, represented approximately 43%, 41%, 43% and 52%, respectively, of our consolidated station operating income.

We note that the percentage of consolidated station operating income at December 31, 2020 is higher than what would normally be expected due to the impact of the COVID-19 pandemic on our markets.

4 unchanged sentences

Station Operating Income(*)

for the Three Months Ended

for the Six Months Ended

for the Years Ended

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

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021.

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021.

Consolidated Results of Operations

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N/M = Not Meaningful

For the three months ended March 31, 2022, consolidated net operating revenue was $24,967,000 compared with $22,301,000 for the three months ended March 31, 2021, an increase of $2,666,000 or 12.0%.

The increase in revenue in the first quarter of 2022 was attributable to lower-than-normal revenue in in the first quarter of 2021 due to the COVID-19 pandemic.

We had increases in gross local revenue of $1,837,000, gross interactive revenue of $752,000, non-spot gross revenue of $340,000, partially offset by a decrease in gross national revenue of $178,000 and an increase in agency commissions of $79,000, from the first quarter of 2021.

The increases in gross local revenue and agency commissions occurred in the majority of our markets, with the most significant increases being at our Charleston, South Carolina;

For the three months ended June 30, 2022, consolidated net operating revenue was $29,821,000 compared with $28,046,000 for the three months ended June 30, 2021, an increase of $1,775,000 or 6.3%.

We had increases in non-spot gross revenue of $623,000, gross interactive revenue of $597,000, gross local revenue of $519,000, gross political revenue of $357,000, and barter revenue of $176,000, partially offset by a decrease in gross national revenue of $409,000 and an increase in agency commissions of $141,000, from the second quarter of 2021.

The increase in non-spot gross revenue is primarily due to us hosting events again in 2022, whereas the number of events that were held in the second quarter of 2021 due to the COVID-19 pandemic was relatively very few.

The markets with the most significant increases in the second quarter in non-spot events were Clarksville, Tennessee;

Harrisonburg, Virginia;

Hilton Head, South Carolina;

Jonesboro, Arkansas;

Milwaukee, Wisconsin;

Norfolk, Virginia and Yankton, South Dakota.

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

The most significant increases in gross local revenue and agency commissions occurred in our Charleston, South Carolina;

Columbus, Ohio;

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Manchester, New Hampshire;

Milwaukee, Wisconsin, and Norfolk, Virginia markets.

The gross political revenue increased due to an increase in the number of national, state and local elections.

The decrease in gross national revenue was attributable to decreases at the majority of markets due to the focus on local market advertisers offset by increases at our Bellingham, Washington;

and Milwaukee, Wisconsin markets.

Station operating expense was $21,786,000 for the three months ended June 30, 2022, compared with $21,017,000 for the three months ended June 30, 2021, an increase of $769,000 or 3.7%.

The increase in operating expense was primarily a result of increases in sales rating survey expenses, barter expenses, commission expense, music licensing fees, interactive services expenses, and promotional expenses, of $303,000, $161,000, $148,000, $95,000, $86,000, and $69,000, respectively, from the second quarter of 2021.

We had operating income for the three months ended June 30, 2022 of $5,381,000 compared to $4,615,000 for the three months ended June 30, 2021, an increase of $766,000.

The increase was a result of the increase in net operating revenue partially offset by the increase in station operating expense, noted above, an increase in corporate general and administrative expenses of $115,000, an increase in other operating (income) expense, net of $125,000.

The increase in corporate general and administrative expenses was primarily attributable to an increase in compensation related expenses from second quarter of 2021.

In the second quarter of 2022 we recorded a loss on the sale of fixed assets of $45,000 compared to a gain on the sale of fixed assets of $80,000 in the second quarter of 2021 in other operating (income) expense, net.

We generated net income of $3,823,000 ($0.63 per share on a fully diluted basis) during the three months ended June 30, 2022, compared to $3,253,000 ($0.54 per share on a fully diluted basis) for the three months ended June 30, 2021, an increase of $570,000.

The increase in net income is primarily due to the increase in operating income, described above a decrease in interest expense of $40,000, an increase in interest income of $45,000, partially offset by a decrease in other income of $31,000 and an increase in income tax expense of $250,000.

The decrease in interest expense is due to no longer having any debt outstanding, after paying off the remaining balance in the fourth quarter of 2021.

The increase in interest income is related to our short-term investments described in footnote 1 (Summary of Significant Accounting Policies).

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

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Results of Operations

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021.

Six Months Ended

(In thousands, except percentages and per share information)

Net operating revenue

Station operating expenses

Corporate general and administrative

Other operating (income) expense, net

Operating income

Interest expense

Interest income

Income before income tax expense

Income tax expense

Earnings per share (diluted)

N/M = Not Meaningful

For the six months ended June 30, 2022, consolidated net operating revenue was $54,788,000 compared with $50,347,000 for the six months ended June 30, 2021, an increase of $4,441,000 or 8.8%.

We had increases in gross local revenue of $2,347,000, gross interactive revenue of $1,345,000, non-spot gross revenue of $962,000, gross political revenue of $267,000, and barter revenue of $262,000 partially offset by a decrease in gross national revenue of $588,000, and an increase in agency commissions of $219,000 for the comparable period of 2021.

The most significant increases in gross local revenue and agency commissions occurred in our Charleston, South Carolina;

Columbus, Ohio;

Ithaca, New York;

Manchester, New Hampshire;

Milwaukee, Wisconsin;

Norfolk, Virginia;

and Portland, Maine markets.

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

The increase in non-spot gross revenue is primarily due to us hosting events again in 2022, whereas the number of events that were held in the first quarter of 2021 due to the COVID-19 pandemic was relatively very few.

The two markets with the most significant increases in the first quarter in non-spot events were Hilton Head, South Carolina and Yankton, South Dakota.

The increase in non-spot gross revenue is primarily due to us hosting events again in 2022, whereas the number of events that were held in 2021 due to the COVID-19 pandemic was relatively very few.

The markets with the most significant increases in 2022 in non-spot events were Clarksville, Tennessee;

Harrisonburg, Virginia;

Hilton Head, South Carolina;

Jonesboro, Arkansas;

Milwaukee, Wisconsin;

Norfolk, Virginia;

Portland, Maine and Yankton, South Dakota.

The gross political revenue increased due to an increase in the number of national, state and local elections.

The decrease in gross national revenue was attributable to decreases at the majority of markets due to the focus on local market advertisers offset by increases at our Columbus, Ohio;

1 unchanged sentence

and Milwaukee, Wisconsin markets.

Station operating expense was $20,568,000 for the three months ended March 31, 2022, compared with $18,923,000 for the three months ended March 31, 2021, an increase of $1,645,000 or 8.7%.

The increase in operating expense was primarily a result of increases in sales rating survey expenses, commission expense, healthcare costs, compensation-related expenses, interactive services expenses, barter expenses, music licensing fees and bad debt expenses, of $515,000, $255,000, $168,000, $155,000, $134,000, $133,000, $98,000 and $97,000, respectively, from the first quarter of 2021.

We had operating income for the three months ended March 31, 2022 of $1,710,000 compared to $883,000 for the three months ended March 31, 2021, an increase of $827,000.

The increase was a result of the increase in net operating revenue partially offset by the increase in station operating expense, noted above, an increase in corporate general and administrative expenses of $256,000, and a decrease in other operating (income) expense, net of $62,000.

The increase in corporate general and administrative expenses was primarily attributable to an increase in travel related expenses, insurance expenses and legal related expenses of $113,000, $100,000 and $61,000, respectively, from first quarter of 2021.

In the first quarter of 2022 we recorded a gain on the sale of fixed assets of $5,000 compared to a loss on the sale of fixed assets of $57,000 in the first quarter of 2021 in other operating (income) expense, net.

We generated net income of $1,204,000 ($0.20 per share on a fully diluted basis) during the three months ended March 31, 2022, compared to $758,000 ($0.13 per share on a fully diluted basis) for the three months ended March 31, 2021, an increase of $446,000.

The increase in net income is primarily due to the increase in operating income, described above and a decrease in interest expense of $41,000, partially offset by a decrease in other income of $270,000 and an increase in income tax expense of $150,000.

Station operating expense was $42,354,0000 for the six months ended June 30, 2022, compared with $39,940,000 for the six months ended June 30, 2021, an increase of $2,414,000 or 6.0%.

The increase in operating expense was primarily the result of increases in sales survey expenses, commission expenses, barter expenses, interactive services expenses, music licensing fees;

bad debt expense, compensation related expenses and promotional expenses of $818,000, $403,000, $294,000, $220,000, $193,000, $186,000, $131,000 and $90,000, respectively, for the comparable period of 2021.

We had operating income for the six months ended June 30, 2022 of $7,091,000 compared to $5,498,000 for the six months ended June 30, 2021, an increase of $1,593,000.

The increase was a result of the increase in net operating revenue and partially offset by an increase in station operating expense, noted above, partially offset by an increase in corporate general and administrative expenses of $371,000 and an increase in other operating (income) expense of $63,000.

The increase in corporate general and administrative expenses was primarily attributable to increases in compensation-related expenses of $136,000, legal expenses of $99,000, travel and transportation expenses of $77,000, insurance-related expenses of $63,000, respectively, from the comparable period of 2021.

In 2022 we recorded a loss on the sale of fixed assets of $40,000 compared to a gain on the sale of fixed assets of $23,000 in 2021 in other operating (income) expense, net.

We generated net income of $5,027,000 ($0.83 per share on a fully diluted basis) during the six months ended June 30, 2022, compared to $4,011,000 ($0.67 per share on a fully diluted basis) for the six months ended June 30, 2021, an increase of $1,016,000.

The increase in net income is primarily due to the increase in operating income, described above a decrease in interest expense of $81,000, an increase in interest income of $43,000, partially offset by a decrease in other income of $301,000 and an increase in income tax expense of $400,000.

The decrease in interest expense is due to no longer having any debt outstanding, after paying off the remaining balance in the fourth quarter of 2021.

The decrease in other income is due to minimal income in 2022 versus a gain on insurance proceeds in the first quarter of 2021, as described in footnote 13 (Other Income).

The increase in interest income is related to our short-term investments described in footnote 1 (Summary of Significant Accounting Policies).

The decrease in other income is due to minimal income in 2022 versus a gain on insurance proceeds in the 2021, as described in footnote 13 (Other Income).

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

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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 (0.3320% at March 31, 2022), plus 1% to 2% or the base rate plus 0% to 1%.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR (1.579% at June 30, 2022), plus 1% to 2% or the base rate plus 0% to 1%.

The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage.

2 unchanged sentences

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 March 31, 2022) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.

The Credit Facility contains a number of financial covenants (all of which we were in compliance with at June 30, 2022) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.

On October 27, 2021, we used $10 million from funds generated by operations to voluntarily pay down the remaining amount on our Revolving Credit Facility.

We had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at March 31, 2022.

We had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at June 30, 2022.

Sources and Uses of Cash

During the three months ended March 31, 2022 and 2021, we had net cash flows from operating activities of $5,296,000 and $5,352,000, respectively.

During the six months ended June 30, 2022 and 2021, we had net cash flows from operating activities of $7,340,000 and $9,203,000, respectively.

We believe that cash flow from operations will be sufficient to meet quarterly debt service requirements for payments of interest and principal under our Credit Facility if we borrow in the future.

2 unchanged sentences

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 March 31, 2022, we have repurchased 2.2 million shares of our Class A Common Stock for $57.4 million.

During the three months ended March 31, 2022, we did not repurchase any shares related to the Buy-Back Program.

Given the unprecedented uncertainty surrounding the COVID-19 virus and the resulting economic issues we have halted the directions for any additional buybacks under our plan.

Our capital expenditures, exclusive of acquisitions, for the three months ended March 31, 2022 were $923,000 ($534,000 in 2021).

From its inception in 1998 through June 30, 2022, we have repurchased 2.2 million shares of our Class A Common Stock for $57.4 million.

During the three and six months ended June 30, 2022, we did not repurchase any shares related to the Buy-Back Program.

Given the unprecedented uncertainty surrounding the current economic environment including interest rates, inflation and ongoing global turmoil we currently have no directions issued for any additional buybacks under our plan.

Our capital expenditures, exclusive of acquisitions, for the six months ended June 30, 2022 were $3,563,000 ($1,455,000 in 2021).

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.

5 unchanged sentences

Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Clarksville, Tennessee market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations.

On June 6, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share on its Classes A and B Common Stock.

This dividend, totaling approximately $1,200,000, was paid to our transfer agent on June 29, 2022.

The dividend was paid by our transfer agent on July 1, 2022 to shareholders of record on June 13, 2022.

On March 1, 2022, 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 $970,000, was paid on April 8, 2022 to shareholders of record on March 21, 2022 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at March 31, 2022.

This dividend, totaling approximately $970,000, was paid on April 8, 2022 to shareholders of record on March 21, 2022.

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.

19 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-Q

Item 2. Management’s Discussion and Analysis