What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-09 · 69 added, 64 removed, 222 unchanged (37% of the section changed)

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dependence on key stations;

national and local economic conditions or an economic recission;

national and local economic conditions or an economic recession;

market volatility;

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

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.

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

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

Des Moines, Iowa;

Milwaukee, Wisconsin, Norfolk;

Virginia and Portland, Maine markets, when combined, represented approximately 38%, 39%, 39% and 40%, respectively, of our consolidated net operating revenue.

Milwaukee, Wisconsin;

Norfolk, Virginia;

and Portland, Maine markets, when combined, represented approximately 38%, 40%, 39% and 40%, respectively, of our consolidated net operating revenue.

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

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Net Operating Revenue

the Six Months Ended

the Nine Months Ended

for the Years Ended

September 30,

Columbus, Ohio

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Portland, Maine

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.

During the nine months ended September 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 44%, 43%, 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.

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Station Operating Income(*)

for the Six Months Ended

for the Nine Months Ended

for the Years Ended

September 30,

Columbus, Ohio

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

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

Results of Operations

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

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

Consolidated Results of Operations

Three Months Ended

September 30,

(In thousands, except percentages and per share information)

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Income tax expense

Net (loss) income

Earnings per share (diluted)

N/M = Not Meaningful

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;

For the three months ended September 30, 2022, consolidated net operating revenue was $29,980,000 compared with $28,845,000 for the three months ended September 30, 2021, an increase of $1,135,000 or 3.9%.

We had increases in gross political revenue of $602,000, non-spot gross revenue of $381,000, gross local revenue of $160,000 and gross interactive revenue of $156,000, partially offset by an increase in agency commissions of $170,000, from the third quarter of 2021.

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

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 third quarter of 2021 due to the COVID-19 pandemic was relatively very few.

The markets with the most significant increases in the third quarter in non-spot events were Des Moines, Iowa;

Milwaukee, Wisconsin;

Norfolk, Virginia and Yankton, South Dakota.

Portland, Maine;

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;

Ithaca, New York;

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.

and Ocala, Florida markets.

Station operating expense was $22,295,000 for the three months ended September 30, 2022, compared with $21,690,000 for the three months ended September 30, 2021, an increase of $605,000 or 2.8%.

The increase in operating expense was primarily a result of increases in compensation-related expense, sales rating survey expenses, and commission expense, of $318,000, $293,000, and $214,000, respectively, partially offset by a decrease in healthcare costs of $303,000, from the third quarter of 2021.

We had operating income for the three months ended September 30, 2022 of $1,055,000 compared to $4,619,000 for the three months ended September 30, 2021, a decrease of $3,564,000.

The decrease was a result of the increase in net operating revenue partially offset by the increase in station operating expense, noted above, an increase in other operating (income) expense, net of $35,000, offset by an increase in corporate general and administrative expenses of $4,129,000.

In the third quarter of 2022, we recorded a gain on the sale of fixed assets of $37,000 compared to a loss on the sale of fixed assets of $2,000 in the third quarter of 2022 in other operating (income) expense, net.

The increase in corporate general and administrative expenses was primarily attributable to expenses under the employment agreement we had with our founder and CEO, Mr.

Christian, upon his death of which $3.9 million was recorded in the third quarter, as well as an increase of $77,000 in FCC-related fees.

We generated a net loss of $104,000 ( ($0.01) per share on a fully diluted basis) during the three months ended September 30, 2022, compared to net income of $3,454,000 ($0.58 per share on a fully diluted basis) for the three months ended September 30, 2021, a decrease of $3,558,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest income of $130,000, partially offset by a decrease in interest expense of $41,000, a decrease in other income of $245,000 and a decrease in income tax expense of $80,000.

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

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 the insurance gains received in 2021 versus.

the minimal other income earned in 2022.

The decrease in our income tax expense is due to the decrease in income before income tax and the permanent difference between book and taxable income related to the compensation paid to our founder and CEO as described above and in footnote 8 (Income Taxes).

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 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

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

Nine Months Ended

September 30,

(In thousands, except percentages and per share information)

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Income tax expense

Net (loss) income

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%.

For the nine months ended September 30, 2022, consolidated net operating revenue was $84,768,000 compared with $79,192,000 for the nine months ended September 30, 2021, an increase of $5,576,000 or 7.0%.

We had increases in gross local revenue of $2,512,000, gross interactive revenue of $1,502,000, non-spot gross revenue of $1,352,000, gross political revenue of $873,000, and barter revenue of $271,000 partially offset by a decrease in gross national revenue of $658,000, and an increase in agency commissions of $393,000 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;

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Milwaukee, Wisconsin;

Norfolk, Virginia;

and Portland, Maine markets.

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

Harrisonburg, Virginia;

Des Moines, Iowa;

Hilton Head, South Carolina;

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Milwaukee, Wisconsin;

Norfolk, Virginia;

Portland, Maine and Yankton, South Dakota.

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and Milwaukee, Wisconsin markets.

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.

Station operating expense was $64,649,0000 for the nine months ended September 30, 2022, compared with $61,630,000 for the nine months ended September 30, 2021, an increase of $3,019,000 or 4.9%.

The increase in operating expense was primarily the result of increases in sales survey expenses, commission expenses, compensation related expenses, barter expenses, bad debt expenses, and music licensing fees of $1,111,000, $617,000, $449,000, $312,000, $297,000 and $219,000, respectively, for the comparable period of 2021.

We had operating income for the nine months ended September 30, 2022 of $8,146,000 compared to $10,117,000 for the nine months ended September 30, 2021, a decrease of $1,971,000.

The decrease was a result of the increase in net operating revenue, partially offset by an increase in station operating expense, as noted above, offset by an increase in corporate general and administrative expenses of $4,500,000 and an increase in other operating (income) expense of $28,000.

The increase in corporate general and administrative expenses was primarily attributable to expenses under the employment agreement we had with our founder and CEO, Mr.

Christian upon his death of which $3.9 million was recorded in the third quarter.

In addition, we had an increase in other compensation-related expenses (besides those related to our founder), legal expenses, transportation related costs and FCC-related fees of $290,000, $167,000, $115,000, and $77,000, respectively, from 2021.

For our other operating (income) expense, net in 2022 we recorded a loss on the sale of fixed assets of $3,000 compared to a gain on the sale of fixed assets of $25,000 in 2021.

We generated net income of $4,923,000 ($0.82 per share on a fully diluted basis) during the nine months ended September 30, 2022, compared to $7,465,000 ($1.25 per share on a fully diluted basis) for the nine months ended September 30, 2021, a decrease of $2,542,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest income of $173,000 and an increase in income tax expense of $320,000, partially offset by a decrease in interest expense of $122,000, and a decrease in other income of $546,000.

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.

The increase in our income tax expense is due to the permanent difference between book and taxable income related to the compensation paid to our founder and CEO as described above and in footnote 8 (Income Taxes).

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 the insurance gains received in 2021 versus.

the minimal other income earned in 2022.

Liquidity and Capital Resources

Debt Arrangements and Debt Service Requirements

On August 18, 2015, we entered into a new credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P.

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”).

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

We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility.

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.

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.

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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 (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.

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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.

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.

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 June 30, 2022.

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

Sources and Uses of Cash

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.

During the nine months ended September 30, 2022 and 2021, we had net cash flows from operating activities of $14,362,000 and $13,905,000, 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.

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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 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.

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

During the three and nine months ended September 30, 2022, we repurchased 273 shares for approximately $7,000 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).

Our capital expenditures, exclusive of acquisitions, for the nine months ended September 30, 2022 were $4,731,000 (versus $2,687,000 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.

On July 12, 2021, we entered into an agreement to acquire WIZZ-AM and a translator from P.

Radio for $61,800 of which $5,000 was paid in 2021 and the remaining was paid on April 6, 2022 when we closed on the transaction.

Radio for $61,800 of which $5,000 was paid in 2021 and the remainder was paid on April 6, 2022 when we closed on the transaction.

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.

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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 September 20, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share and a 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 payable 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.

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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