What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-10 · 91 added, 48 removed, 179 unchanged (44% of the section changed)

50 unchanged sentences

We own or operate broadcast properties in 27 markets, including 79 FM and 33 AM radio stations and 80 metro signals.

We anticipate our corporate general and administrative expense to decrease from 2022 significantly because of approximately $3.8 million in expenses incurred related to the passing our of CEO, Edward Christian and payments required as a result of his death.

We anticipate our corporate general and administrative expense to decrease from 2022 significantly because of approximately $3.8 million in expenses incurred related to the passing of our CEO, Edward Christian and payments required as a result of his death.

This reduction will be offset, however, by an increase in directors’ fees of $312,000 and by investments we anticipate making in corporate personnel, and sales and training initiatives.

4 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, 2023 and 2022, approximately 90% and 91%, respectively, of our radio stations’ gross revenue was from local advertising.

For the six months ended June 30, 2023 and 2022, approximately 89% and 90%, 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.

30 unchanged sentences

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

During the three months ended March 31, 2023 and 2022 and the years ended December 31, 2022 and 2021, our Columbus, Ohio;

During the six months ended June 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, our Columbus, Ohio;

Des Moines, Iowa;

8 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, 2023 and 2022 and the years ended December 31, 2022 and 2021, the radio stations in our five largest markets, when combined, represented approximately 40%, 44%, 44% and 43%, respectively, of our consolidated station operating income.

During the six months ended June 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, the radio stations in our five largest markets, when combined, represented approximately 39%, 43%, 44% and 43%, respectively, of our consolidated station operating income.

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

3 unchanged sentences

Station Operating Income(*)

for the Three Months Ended

for the Six Months Ended

for the Years Ended

5 unchanged sentences

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, 2023 Compared to Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022.

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022.

Consolidated Results of Operations

Three Months Ended

8 unchanged sentences

Income before income tax expense

Income tax expense

Income tax provision

Earnings per share (diluted)

N/M = Not Meaningful

For the three months ended March 31, 2023, consolidated net operating revenue was $25,304,000 compared with $24,967,000 for the three months ended March 31, 2022, an increase of $337,000 or 1.3%.

We had increases in non-spot gross revenue of $243,000, gross interactive revenue of $158,000, gross national revenue of $157,000, gross political revenue of $73,000, and gross other revenue of $51,000 partially offset by a decrease in gross local revenue of $265,000, and an increase in agency commissions of $92,000 for the comparable period of 2022.

The markets with the most significant increases in 2023 in non-spot events were Bellingham, Washington;

Des Moines, Iowa;

Ocala, Florida;

and Yankton, South Dakota.

For the three months ended June 30, 2023, consolidated net operating revenue was $29,175,000 compared with $29,821,000 for the three months ended June 30, 2022, a decrease of $646,000 or 2.2%.

We had decreases in gross political revenue of $679,000, gross local revenue of $679,000 and gross barter revenue of $78,000, partially offset by increases in gross interactive revenue of $362,000, gross national revenue of $290,000 and gross non-spot revenue of $191,000, from the second quarter of 2022.

The gross political revenue decreased due to a decrease in the number of national, state and local elections.

The decrease in gross local revenues was attributable to decreases at our Charleston, South Carolina;

Columbus, Ohio;

Ithaca, New York;

Milwaukee, Wisconsin;

Portland, Maine;

Springfield, Illinois markets partially offset by increases at our Bellingham, Washington and Ocala, Florida markets.

The decrease in our gross barter revenue is due to minor decreases at the majority of our markets.

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

The most significant increases in gross national revenue and agency commissions occurred in our Charlottesville, Virginia;

The most significant increases in gross national revenue occurred in our Norfolk, Virginia and Ocala, Florida markets.

The most significant increases in gross non-spot revenue occurred in our Charleston, South Carolina;

Keene, New Hampshire;

Milwaukee, Wisconsin and Yankton, South Dakota markets.

Station operating expense was $22,407,000 for the three months ended June 30, 2023, compared with $21,786,000 for the three months ended June 30, 2022, an increase of $621,000 or 2.9%.

The increase in operating expense was primarily a result of increases in compensation-related expense, building maintenance and repairs, commission expense, utility expenses, sales rating survey expenses, and programming rights expenses, of $433,000, $131,000, $127,000, $78,000, $62,000 and $33,000, respectively, partially offset by a decrease in healthcare costs of $270,000, from the second quarter of 2022.

We had operating income for the three months ended June 30, 2023 of $4,296,000 compared to $5,381,000 for the three months ended June 30, 2022, a decrease of $1,085,000.

The decrease was a result of the decrease in net operating revenue and increase in station operating expense, noted above, partially offset by a decrease in corporate general and administrative expenses of $137,000 and a decrease in other operating (income) expense, net of $45,000.

In the second quarter of 2022, we recorded a loss on the sale of fixed assets of $45,000 compared to no gain or loss on the sale of fixed assets in the second quarter of 2023 in other operating (income) expense, net.

The decrease in corporate general and administrative expenses was primarily comprised of a decrease of $300,000 in compensation-related expense partially offset by an increase of $66,000 in directors’ fees and $90,000 in other consulting fees.

We generated net income of $3,350,000 ($0.55 per share on a fully diluted basis) during the three months ended June 30, 2023, compared to $3,823,000 ($0.63 per share on a fully diluted basis) for the three months ended June 30, 2022, a decrease of $473,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $11,000 partially offset by an increase in interest income of $298,000 and a decrease in income tax expense of $325,000.

The increase in interest expense is due to an increase in interest rates and amortization of bank fees.

The increase in interest income is related to higher rates of return on money market accounts reflected as cash equivalents and from our short-term investment accounts which began in May 2022.

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Results of Operations

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022.

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 provision

Earnings per share (diluted)

N/M = Not Meaningful

For the six months ended June 30, 2023, consolidated net operating revenue was $54,479,000 compared with $54,788,000 for the six months ended June 30, 2022, a decrease of $309,000 or 0.6%.

We had decreases in gross local revenue of $956,000, and gross political revenue of $606,000, and an increase in agency commissions of $108,000 partially offset by increases in gross interactive revenue of $535,000, gross national revenue of $447,000 and gross non-spot revenue of $435,000, from 2022.

The decrease in gross local revenues was attributable to decreases at our Charleston, South Carolina;

Columbus, Ohio;

Ocala, Florida;

Portland, Maine and Springfield, Massachusetts markets.

The gross political revenue increased due to an increase at our Harrisonburg, Virginia and Milwaukee, Wisconsin markets partially offset by decreases at our other markets.

We expected a decrease in the number of national, state and local elections, however, both of these markets experienced issue-related political revenue for the first quarter of 2023.

The increase in gross other revenue is primarily due to new lease income at our Norfolk, Virginia market.

The decrease in gross local revenue was attributable to decreases at our Columbus, Ohio;

Ithaca, New York and Milwaukee, Wisconsin markets partially offset by increases at the majority of rest of our markets.

Station operating expense was $21,703,000 for the three months ended March 31, 2023, compared with $20,568,000 for the three months ended March 31, 2022, an increase of $1,135,000 or 5.5%.

The increase in operating expense was primarily the result of increases in compensation-related expenses, healthcare expenses, utility expenses, programming rights expenses, promotion expenses, credit card sales expenses, sales survey expenses, and sales training expenses, of $472,000, $272,000, $88,000, $80,000, $34,000, $26,000, $25,000 and $24,000, respectively, for the comparable period of 2022.

We had operating income for the three months ended March 31, 2023 of $905,000 compared to $1,710,000 for the three months ended March 31, 2022, a decrease of $805,000.

The decrease was a result of the increase in station operating expense, partially offset by an increase in net operating revenue, as noted above, offset by a decrease in corporate general and administrative expenses of $78,000 and an increase in other operating (income) expense of $85,000.

Ithaca, New York;

Milwaukee, Wisconsin;

and Springfield, Illinois markets partially offset by increases at our Asheville, North Carolina;

Bellingham, Washington and Charlottesville, Virginia markets.

The gross political revenue decreased due to a decrease in the number of national, state and local elections.

The increase in agency commissions is due to increases in both our national and local agency revenue.

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

The most significant increases in gross national revenue occurred in our Charlottesville, Virginia;

Des Moines, Iowa;

Norfolk, Virginia and Ocala, Florida markets.

The most significant increases in gross non-spot revenue occurred in our Charleston, South Carolina;

Milwaukee, Wisconsin;

Ocala, Florida and Yankton, South Dakota markets.

Station operating expense was $44,110,000 for the six months ended June 30, 2023, compared with $42,354,000 for the six months ended June 30, 2022, an increase of $1,756,000 or 4.1%.

The increase in operating expense was primarily a result of increases in compensation-related expense, utility expenses, sales commission expenses, building maintenance and repairs, programming rights expense, sales rating survey expenses, sales training expenses, music licensing fees and promotional expenses, of $822,000, $166,000, $161,000, $146,000, $113,000, $87,000, $48,000, $47,000 and $46,000, respectively, for the comparable period of 2022.

We had operating income for the six months ended June 30, 2023 of $5,201,000 compared to $7,091,000 for the six months ended June 30, 2022, a decrease of $1,890,000.

The decrease was a result of the decrease in net operating revenue and the increase in station operating expense, as noted above, an increase in other operating (income) expense, net of $40,000 partially offset by a decrease in corporate general and administrative expenses of $215,000.

In 2023, we recorded a loss on the sale of fixed assets of $80,000 compared to a loss on the sale of fixed assets of $40,000 in 2022.

The decrease in corporate general and administrative expenses was primarily comprised of a decrease of $502,000 in compensation-related expense partially offset by an increase of $131,000 in directors’ fees and $195,000 in other consulting fees.

For our other operating (income) expense, net in 2023 we recorded a loss on the sale of fixed assets of $80,000 compared to a gain on the sale of fixed assets of $5,000 in 2022.

We generated net income of $920,000 ($0.15 per share on a fully diluted basis) during the three months ended March 31, 2023, compared to $1,204,000 ($0.20 per share on a fully diluted basis) for the three months ended March 31, 2022, a decrease of $284,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $11,000, partially offset by an increase in interest income of $285,000, an increase in other income of $117,000 and a decrease in income tax expense of $130,000.

We generated net income of $4,270,000 ($0.70 per share on a fully diluted basis) during the six months ended June 30, 2023, compared to $5,027,000 ($0.83 per share on a fully diluted basis) for the six months ended June 30, 2022 ended, a decrease of $757,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $22,000 partially offset by an increase in interest income of $583,000, an increase in other income of $117,000 and an increase in income tax expense of $455,000.

The increase in interest expense is due to an increase in interest rates and amortization of bank fees.

The increase in interest income is related to higher rates of return on money market accounts reflected as cash equivalents and from our short-term investment accounts which began in May 2022.

The increase in other income is due to reimbursements from the FCC related to their spectrum auction of $115,000 described in footnote 13 (Other Income) versus.

the minimal other income earned in 2022.

The decrease in our income tax expense is due to lower income before income tax expense and a lower effective tax rate as a result of a reduction in non-deductible compensation over the prior period.

The increase in other income is due to reimbursements from the FCC related to their spectrum auction of $115,000 described in footnote 13 (Other Income) 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.

Liquidity and Capital Resources

7 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 SOFR (4.870% at March 31, 2023), 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 SOFR (5.09% at June 30, 2023), plus 1% to 2% or the base rate plus 0% to 1%.

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

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.

Under the Third Amendment, we now pay quarterly commitment fees of 0.25% per annum on the used portion of the Credit Facility.

Under the Third Amendment, we now pay quarterly commitment fees of 0.25% per annum on the unused portion of the Credit Facility.

We previously paid 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, 2023) 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 have no debt outstanding at December 31, 2022 or March 31, 2023.

We have approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at both March 31, 2023 and December 31, 2022.

The Credit Facility contains a number of financial covenants (all of which we were in compliance with at June 30, 2023) 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 no debt outstanding at December 31, 2022 or June 30, 2023.

We had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at both June 30, 2023 and December 31, 2022.

Sources and Uses of Cash

During the three months ended March 31, 2023 and 2022, we had net cash flows from operating activities of $4,835,000 and $5,296,000, respectively.

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

During the six months ended June 30, 2023 and 2022, we had net cash flows from operating activities of $6,038,000 and $7,340,000, 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.

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.

1 unchanged sentence

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, 2023, we have repurchased 2.2 million shares of our Class A Common Stock for $57.6 million.

During the three months ended March 31, 2023, we did not repurchase any shares related to the Buy-Back Program.

From its inception in 1998 through June 30, 2023, we have repurchased 2.2 million shares of our Class A Common Stock for $57.6 million.

During the three and six months ended June 30, 2023, we did not repurchase any shares related to the Buy-Back Program.

We halted the directions issued for any additional buybacks under our plan in 2020.

We continue to monitor economic conditions to determine if and when it makes sense to make additional buybacks under our plan.

Our capital expenditures, exclusive of acquisitions, for the three months ended March 31, 2023 were $1,362,000 ($923,000 in 2022).

Our capital expenditures, exclusive of acquisitions, for the six months ended June 30, 2023 were $2,637,000 (3,563,000 in 2022).

We anticipate capital expenditures in 2023 to be approximately $5.0 million to $5.5 million, which we expect to finance through funds generated from operations.

3 unchanged sentences

The translators are start-up stations and therefore, have no pro forma revenue and expenses.

Subsequent to the quarter ending March 31, 2023, on May 9, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share on its Class A Common Stock.

This dividend, totaling approximately $1,500,000 will be paid on June 16, 2023 to shareholders of record on May 22, 2023.

On May 9, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share on its Class A Common Stock.

This dividend, totaling approximately $1,500,000 was paid on June 16, 2023 to shareholders of record on May 22, 2023.

On March 1, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share on its Class A Common Stock.

This dividend, totaling approximately $1,500,000, was paid on April 7, 2023 to shareholders of record on March 20, 2023 and is recorded in dividends payables in our Condensed Consolidated Balance Sheet at March 31, 2023.

This dividend, totaling approximately $1,500,000, was paid on April 7, 2023 to shareholders of record on March 20, 2023.

On December 7, 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 Class A Common Stock.

This dividend, totaling approximately $13,800,000, was paid on January 13, 2023 to shareholders of record on December 21, 2022 and is recorded in dividends payable in our Condensed Consolidated Balance Sheet at December 31, 2022.

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 Class A Common Stock.

This dividend, totaling approximately $13,800,000, was paid on January 13, 2023 to shareholders of record on December 21, 2022.

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.

18 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