What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-09 · 129 added, 51 removed, 345 unchanged (34% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(In thousands)

35 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

8 unchanged sentences

Income tax expense

Earnings per share:

Net income (loss)

Earnings (loss) per share:

Weighted average common shares

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three and six months ended June 30, 2022 and 2021

For the three and nine months ended September 30, 2022 and 2021

Stockholders’

9 unchanged sentences

Balance at June 30, 2021

Net income, three months ended September 30, 2021

Dividends declared per common share

Compensation expense related to restricted stock awards

Balance at September 30, 2021

Stockholders’

10 unchanged sentences

Balance at June 30, 2022

Net loss, three months ended September 30, 2022

Conversion of shares from Class B to Class A

Dividends declared per common share

Compensation expense related to restricted stock awards

Purchase of shares held in treasury

Balance at September 30, 2022

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Purchase of Short-term investments

Redemption of Short-term investments

Acquisition of property and equipment

6 unchanged sentences

Cash dividends paid

Purchase of treasury shares

Net cash used in financing activities

9 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for annual financial statements.

In our opinion, the accompanying financial statements include all adjustments of a normal, recurring nature considered necessary for a fair presentation of our financial position as of June 30, 2022 and the results of operations for the three and six months ended June 30, 2022 and 2021.

Results of operations for three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

In our opinion, the accompanying financial statements include all adjustments of a normal, recurring nature considered necessary for a fair presentation of our financial position as of September 30, 2022 and the results of operations for the three and nine months ended September 30, 2022 and 2021.

Results of operations for three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

We own or operate broadcast properties in 27 markets, including 79 FM and 35 AM radio stations and 80 metro signals.

1 unchanged sentence

annual report on Form 10-K for the year ended December 31, 2021.

We have evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2022, for items that should potentially be recognized in these financial statements or discussed within the notes to these financial statements.

We have evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2022, for items that should potentially be recognized in these financial statements or discussed within the notes to these financial statements.

Earnings Per Share Information

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

Net (loss) income

Income allocated to unvested participating securities

4 unchanged sentences

Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions

Earnings per share:

There were no stock options outstanding that had an antidilutive effect on our earnings per share calculation for the three months ended June 30, 2022 and 2021, respectively.

Earnings (loss) per share:

There were no stock options outstanding that had an antidilutive effect on our earnings per share calculation for the three months ended September 30, 2022 and 2021, respectively.

The actual effect of these shares, if any, on the diluted earnings per share calculation will vary significantly depending on the fluctuation in the stock price.

2 unchanged sentences

held-to-maturity, available-for-sale, or trading securities, and depending upon the classification, value the security at amortized cost or fair market value.

At June 30, 2022, we have recorded $ 10 million of held-to-maturity United States’ Treasury Bills at amortized cost basis, that has a fair market value of $ 10 million.

Our held-to-maturity United States’ Treasury Bills all have original maturity dates ranging from July 2022 to February 2023.

At September 30, 2022, we have recorded $ 10.1 million of held-to-maturity U.S.

Treasury Bills at amortized cost basis that have a fair market value of $ 10 million.

Our held-to-maturity U.S.

Treasury Bills all have original maturity dates ranging from November 2022 to June 2023.

We had no marketable securities at December 31, 2021.

Our financial instruments are comprised of cash and cash equivalents, accounts receivable, accounts payable and long-term debt.

Our financial instruments are comprised of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and long-term debt.

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities.

The carrying value of long-term debt approximates fair value as it carries interest rates that either fluctuate with the euro-dollar rate, prime rate or have been reset at the prevailing market rate at June 30, 2022.

SAGA COMMUNICATIONS, INC.

8 unchanged sentences

In the event we recover amounts previously written off, we will reduce the specific allowance for credit loss.

Our allowance for doubtful accounts was $ 359,000 and $ 469,000 at June 30, 2022 and December 31, 2021, respectively.

Our effective tax rate is higher than the federal statutory rate as a result of the inclusion of state taxes in the income tax amount.

Our allowance for doubtful accounts was $ 392,000 and $ 469,000 at September 30, 2022 and December 31, 2021, respectively.

Our effective tax rate is higher than the federal statutory rate as a result of the inclusion of state taxes in the income tax amount and permanent differences related to the compensation of our CEO.

We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period.

30 unchanged sentences

Disaggregation of Revenue

Revenues from contracts with customers comprised the following for three and six months ended June 30, 2022 and 2021:

Revenues from contracts with customers comprised the following for three and nine months ended September 30, 2022 and 2021:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

32 unchanged sentences

Amortizable intangible assets are included in other intangibles, deferred costs and investments in the consolidated balance sheets.

The Company considered the current and expected future economic and market conditions, and other potential indicators of impairment and determined a triggering event had not occurred which would necessitate any interim impairment tests during the six months ended June 30, 2022.

We will continue to monitor changes in economic and market conditions, and if any event or circumstances indicate a triggering event has occurred, we will perform an interim impairment test of our intangible assets at the appropriate time.

8 unchanged sentences

Common Stock and Treasury Stock

The following summarizes information relating to the number of shares of our common stock issued in connection with stock transactions through June 30, 2022:

Our founder, Chairman, President and CEO, Edward K.

Christian, passed away on August 19, 2022.

As of the date of his passing, Mr.

Christian, who was also our principal shareholder, held approximately 65 % of the combined voting power of the Company’s Common Stock based on Class B Common Stock generally being entitled to ten votes per share.

As a result, Mr.

Christian was generally able to control the vote on most matters submitted to the vote of stockholders and, therefore, was able to direct our management and policies, except with respect to (i) the election of two Class A directors, (ii) those matters where the shares of our Class B Common Stock are only entitled to one vote per share, and (iii) other matters requiring a class vote under the provisions of our certificate of incorporation, bylaws or applicable law.

Christian’s passing and the resultant transfer of his Class B shares into an estate planning trust resulted in an automatic conversion of each Class B share he held into one fully paid and non-assessable Class A share.

We no longer have any shares of Class B Common Stock issued or outstanding.

Stockholders are entitled to receive such dividends as may be declared by our Board of Directors out of funds legally available for such purpose.

However, no dividend may be declared or paid in cash or property on any share of any class of Common Stock unless simultaneously the same dividend is declared or paid on each share of the other class of common stock.

In the case of any stock dividend, holders of Class A Common Stock are entitled to receive the same percentage dividend (payable in shares of Class A Common Stock) as the holders of Class B Common Stock receive (payable in shares of Class B Common Stock).

Voting Rights.

Holders of shares of Common Stock vote as a single class on all matters submitted to a vote of the stockholders, with each share of Class A Common Stock entitled to one vote.

Christian’s passing, each share of Class B Common Stock was entitled to ten votes, except (i) in the election for directors, (ii) with respect to any “going private” transaction between the Company and the principal stockholder, and (iii) as otherwise provided by law.

Christian’s passing, in the election of directors, the holders of Class A Common Stock, voting as a separate class, were entitled to elect twenty-five percent, or two, of our directors.

The holders of the Common Stock, voting as a single class with each share of Class A Common Stock entitled to one vote and each share of Class B Common Stock entitled to ten votes, were entitled to elect the remaining directors.

The Board of Directors consisted of eight members at December 31, 2021.

Currently, our Board of Directors consists of seven members.

Holders of Common Stock are not entitled to cumulative voting in the election of directors.

The holders of the Common Stock vote as a single class with respect to any proposed “going private” transaction with the principal stockholder or an affiliate of the principal stockholder, with each share of each class of Common Stock entitled to one vote per share.

Under Florida law, the affirmative vote of the holders of a majority of the outstanding shares of any class of common stock is required to approve, among other things, a change in the designations, preferences and limitations of the shares of such class of common stock.

Liquidation Rights.

Upon our liquidation, dissolution, or winding-up, the holders of Class A Common Stock are entitled to share ratably in accordance with the number of shares held in all assets available for distribution after payment in full of creditors.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following summarizes information relating to the number of shares of our common stock issued in connection with stock transactions through September 30, 2022:

Common Stock Issued

4 unchanged sentences

Balance, December 31, 2021

Balance, June 30, 2022

Conversion of shares from Class B to Class A

Balance, September 30, 2022

We have a Stock Buy-Back Program to allow us to purchase up to $ 75.8 million of our Class A Common Stock.

As of June 30, 2022, we have remaining authorization of $ 18.4 million for future repurchases of our Class A Common Stock.

As of September 30, 2022, we have remaining authorization of $ 18.4 million for future repurchases of our Class A Common Stock.

On September 14, 2017, the Board of Directors authorized the repurchase of our Class A Common Stock under our trading plan adopted pursuant to Securities and Exchange Commission Rule 10b5-1.

5 unchanged sentences

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

During the three and six months ended June 30, 2022 and 2021 no shares were repurchased under the Stock Buy-Back Program.

During the three and nine months ended September 30, 2022, we repurchased 273 shares for approximately $ 7,000 for payment of withholding taxes related to the vesting of restricted stock.

During the three and nine months ended September 30, 2021, no shares were repurchased under the Stock Buy-Back Program.

We lease certain land, buildings and equipment for use in our operations.

5 unchanged sentences

Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

As of June 30, 2022, we do not have any non-cancellable operating lease commitments that have not yet commenced.

As of September 30, 2022, we do not have any non-cancellable operating lease commitments that have not yet commenced.

ROU assets are classified within other intangibles, deferred costs and investments, net on the condensed consolidated balance sheet while current lease liabilities are classified within other accrued expenses and long-term lease liabilities are classified within other liabilities.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

ROU assets were $ 5.5 million and $ 6.1 million at June 30, 2022 and December 31, 2021 respectively.

Lease liabilities were $ 5.8 million and $ 6.4 million at June 30, 2022 and December 31, 2021, respectively.

During the six months ended June 30, 2022, we recorded additional ROU assets under operating leases of $ 219,000 .

Payments on lease liabilities during the three and six months ended June 30, 2022 and 2021 totaled $ 428,000 , $ 906,000 , $ 415,000 , and $ 884,000 , respectively.

ROU assets were $ 5.1 million and $ 6.1 million at September 30, 2022 and December 31, 2021 respectively.

Lease liabilities were $ 5.4 million and $ 6.4 million at September 30, 2022 and December 31, 2021, respectively.

During the nine months ended September 30, 2022, we recorded additional ROU assets under operating leases of $ 445,000 .

Payments on lease liabilities during the three and nine months ended September 30, 2022 and 2021 totaled $ 466,000 , $ 1,372,000 , $ 451,000 , and $ 1,335,000 , respectively.

Lease expense includes cost for leases with terms in excess of one year.

For the three and six months ended June 30, 2022 and 2021, our total lease expense was $ 449,000 , $ 893,000 , $ 442,000 and $ 882,000 , respectively.

Short-term lease costs are de minimus.

For the three and nine months ended September 30, 2022 and 2021, our total lease expense was $ 450,000 , $ 1,343,000 , $ 443,000 and $ 1,325,000 , respectively.

Short-term lease costs are de minimis in nature.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We have no financing leases and minimum annual rental commitments under non-cancellable operating leases consisted of the following at June 30, 2022 (in thousands):

We have no financing leases and minimum annual rental commitments under non-cancellable operating leases consisted of the following at September 30, 2022 (in thousands):

Years Ending December 31,

1 unchanged sentence

Present value of lease liabilities (d)

(a) Remaining payments are for the nine-months ending December 31, 2022

(a) Remaining payments are for the three-months ending December 31, 2022

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised.

There were no legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2022.

There were no legally binding minimum lease payments for leases signed but not yet commenced at September 30, 2022.

Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.1 years and 4.2 % , respectively, at June 30, 2022.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.1 years and 4.3 % , respectively, at September 30, 2022.

Acquisitions and Dispositions

35 unchanged sentences

This legislation currently has no material impact to the Company’s financial statements.

An income tax expense of $ 1,575,000 was recorded for the three months ended June 30, 2022 compared to $ 1,325,000 for the three months ended June 30, 2021.

The effective tax rate was approximately 29.2 % for the three months ended June 30, 2022 compared to 28.9 % for the three months ended June 30, 2021.

An income tax expense of $ 2,055,000 was recorded for the six months ended June 30, 2022 compared to $ 1,655,000 for the three months ended June 30, 2021.

The effective tax rate was approximately 29.0 % for the three months ended June 30, 2022 compared to 29.2 % for the three months ended June 30, 2021.

An income tax expense of $ 1,295,000 was recorded for the three months ended September 30, 2022 compared to $ 1,375,000 for the three months ended September 30, 2021.

The effective tax rate was approximately 108.7 % for the three months ended September 30, 2022 compared to 28.5 % for the three months ended September 30, 2021.

An income tax expense of $ 3,350,000 was recorded for the nine months ended September 30, 2022 compared to $ 3,030,000 for the nine months ended September 30, 2021.

The effective tax rate was approximately 40.5 % for the nine months ended September 30, 2022 compared to 28.9 % for the nine months ended September 30, 2021.

Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e.

discrete items) occurring during the interim period.

The current quarter tax rate was impacted by $ 3.8 million in expenses related to the compensation of our CEO upon his death, in accordance with his employment agreement, that are permanent differences between our book and taxable income.

SAGA COMMUNICATIONS, INC.

9 unchanged sentences

Awards denominated in Class A Common Stock may be granted to any employee or director under the Second Restated 2005 Plan.

However, awards denominated in Class B Common Stock may only be granted to Edward K.

Christian, President, Chief Executive Officer, Chairman of the Board of Directors, and the holder of 100% of the outstanding Class B Common Stock of the Company.

Upon the passing of Mr.

Christian, we no longer have any holders of Class B Common Stock, as those awards denominated in Class B Common Stock were only able to be granted to Mr.

Stock options granted under the Second Restated 2005 Plan may be for terms not exceeding ten (10) years from the date of grant and may not be exercised at a price which is less than 100% of the fair market value of shares at the date of grant .

1 unchanged sentence

All stock options granted were fully vested and expensed at December 31, 2012;

therefore, there was no compensation expense related to stock options for the three and six months ended June 30, 2022 and 2021, respectively.

There were no stock options granted during 2022 or 2021 and there were no stock options outstanding as of June 30, 2022.

therefore, there was no compensation expense related to stock options for the three and nine months ended September 30, 2022 and 2021, respectively.

There were no stock options granted during 2022 or 2021 and there were no stock options outstanding as of September 30, 2022.

All outstanding stock options were exercised in 2017.

The following summarizes the restricted stock transactions for the three and six months ended June 30, 2022:

The following summarizes the restricted stock transactions for the three and nine months ended September 30, 2022:

Outstanding at January 1, 2022

Non-vested and outstanding at June 30, 2022

Non-vested and outstanding at September 30, 2022

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

For the three and six months ended June 30, 2022 and 2021, we had $ 338,000 , $ 677,000 , $ 357,000 and $ 700,000 , respectively, of total compensation expense related to restricted stock-based compensation arrangements.

For the three and nine months ended September 30, 2022 and 2021, we had $ 1,049,000 , $ 1,726,000 , $ 348,000 and $ 1,048,000 , respectively, of total compensation expense related to restricted stock-based compensation arrangements.

This expense is included in corporate general and administrative expenses in our results of operations.

The associated tax benefit recognized for the three and six months ended June 30, 2022 and 2021 was $ 37,000 , $ 74,000 , $ 33,000 and $ 64,000 , respectively.

The increase in the expense for the three and nine months ended September 30, 2022 is due to the immediate vesting of Mr.

Christian’s restricted stock upon his death per his employment agreement of approximately $ 700,000 .

The associated tax benefit recognized for the three and nine months ended September 30, 2022 and 2021 was $ 41,000 , $ 115,000 , $ 30,000 and $ 94,000 , respectively.

Long-Term Debt

On October 27, 2021, we used $ 10 million from funds generated by operations to voluntarily pay down the remaining amounts on our Revolving Credit Facility and as such, have no debt outstanding at June 30, 2022.

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.

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”) pursuant to a credit agreement of even date (the “Credit Agreement”).

5 unchanged sentences

On November 2, 2021, we elected to further reduce our Revolving Credit Facility to $ 50 million.

We are currently working on extending our credit agreement with similar terms and conditions as the existing facility.

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.

3 unchanged sentences

The cumulative transaction fees are being amortized over the remaining life of the Credit Facility.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR ( 1.579 % at June 30, 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 ( 3.065 % at September 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 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.

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

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

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

SAGA COMMUNICATIONS, INC.

2 unchanged sentences

In management’s opinion, the Company is not a party to any current legal proceedings that are material to its financial condition, either individually or in the aggregate.

On September 20, 2022 , the Company’s Board of Directors declared a quarterly cash dividend of $ 0.25 per share and special cash dividend of $ 2.00 per share on its Classes A Common Stock.

This dividend, totaling approximately $ 13,600,000 , was paid on October 21, 2022 to shareholders of record on October 3, 2022 and is recorded in dividends payables in our Condensed Consolidated Balance Sheet at September 30, 2022.

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.

14 unchanged sentences

The total gain of $ 540,000 was recorded in other (income) expense, net, at December 31, 2021 in the Company’s Consolidated Statements of Income in our most recent Form 10-K.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Related Party Transactions

Payments Under the Principal Stockholder Employment Agreement

As previously disclosed Mr.

Christian passed away on August 19, 2022.

As a result of his passing the Company is required to make several payments to his estate as outlined in his employment agreement, as described in our annual report on Form 10-K for the year ended December 31, 2021.

In accordance with ASC 712-10-25, Nonretirement Postemployment Benefits , we have accrued all necessary expenses as of September 30, 2022.

As a result of our contractual obligations under the Mr.

Christian’s agreement, Mr.

Christian’s estate is the beneficiary of a gross amount of approximately $ 6.0 million in cash, common stock and a life insurance policy of which $3.9 million was recorded upon his passing in the third quarter of 2022, and $ 2.1 million had been accrued for in previous periods.

The estate was the beneficiary of a lump-sum payment of his current base salary plus accrued unused vacation time totaling $ 2.1 million which was paid in October 2022.

Christian’s estate will also be provided with a prorated bonus that Mr.

Christian earned of approximately $ 700,000 to be paid in March 2023.

Christian had approximately $ 65,000 withheld as deferred compensation that will be paid to the estate in January 2023.

Additionally, under the agreement, any award previously granted under the Company’s 2005 Incentive Compensation Plan were immediately vested and provided to the estate.

At the date of Mr.

Christian’s passing, he had approximately 55,000 shares of unvested restricted stock that immediately vested at a price of $ 24.80 for a total of $ 1.4 million in common stock received by the estate.

Christian’s spouse is now the beneficiary of the Split Dollar life insurance policy that has a cash surrender value of approximately $ 975,000 .

Lastly, under the agreement, the Company shall continue to pay for the healthcare coverage and life insurance premiums for Mr.

Christian’s spouse for ten years which totals approximately $ 800,000 .

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 1. Financial Statements