What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-15 compared with 2023-03-16 · 75 added, 79 removed, 247 unchanged (38% of the section changed)

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We serve twenty-seven radio markets (reporting units) that aggregate into one operating segment (Radio), which also qualifies as a reportable segment.

We operate under one reportable busines segment for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance.

We operate under one reportable business segment for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance.

Corporate general and administrative expenses, interest expense, write-off debt issuance costs, other (income) expense, and income tax provision are managed on a consolidated basis.

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Station operating income is not a measure of liquidity or of performance in accordance with GAAP, and should be viewed as a supplement to, and not a substitute for, our results of operations presented on a GAAP basis.

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties.

We are a media company primarily engaged in acquiring, developing and operating broadcast properties including opportunities complimentary to our core radio business including digital, e-commerce and non-traditional revenue initiatives.

We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties.

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Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year.

Political revenue was significantly higher in 2022 and 2020 due to the increased number of national, state, and local elections in most of our markets as compared to 2021.

Political revenue was significantly lower in 2023 and 2021 due to the decreased number of national, state, and local elections in most of our markets as compared to 2022.

Our gross political revenue for the years ended December 31, 2023, 2022 and 2021 was $944,000, $3,625,000 and $1,780,000, respectively.

We expect political revenue in 2023 to decrease from 2022 levels as a result of less elections in 2023 at the local, state and national levels.

We expect political revenue in 2024 to increase from 2023 levels as a result of more elections in 2024 at the local, state and national levels.

Our net operating revenue, station operating expense and operating income vary from market to market based upon the market’s rank or size which is based upon population and the available radio advertising revenue in that particular market.

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We believe that the diversification of formats on our radio stations helps to insulate us from the effects of changes in musical tastes of the public on any particular format.

The primary operating expenses involved in owning and operating radio stations are employee salaries, sales commissions, programming expenses, depreciation, and advertising and promotion expenses.

The primary operating expenses involved in owning and operating radio stations are employee salaries and related benefit costs, sales commissions, programming expenses, depreciation, and advertising and promotion expenses.

The radio broadcasting industry is subject to rapid technological change, evolving industry standards and the emergence of new media technologies and services.

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Our goal is to allow our listeners to connect with our brands on demand wherever, however, and whenever they choose.

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

We continue to create and expand opportunities for revenue generation 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 years ended December 31, 2023, 2022 and 2021, our Columbus, Ohio;

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

We note that the percent of consolidated station operating income at December 31, 2020 is higher than normal due to the impact of the COVID-19 pandemic on our markets.

As the pandemic is resolved, we would anticipate results by market to continue to be back to normalized amounts in future years.

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

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Corporate general and administrative

Other operating (income) expense, net

Impairment of intangible assets

Operating income (loss)

Other operating expense (income), net

Operating income

Interest expense

Interest income

Income (loss) before income tax expense (benefit)

Income before income tax expense

Income tax provision

Net income (loss)

Earnings (loss) per share (diluted)

Earnings per share (diluted)

N/M = Not Meaningful

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

For the year ended December 31, 2023, consolidated net operating revenue was $112,773,000 compared with $114,893,000 for the year ended December 31, 2022, a decrease of $2,120,000 or 1.8%.

The decrease in revenue in 2023 was due to decreases in gross political revenue of $2,681,000, and gross local revenue of $2,401,000 partially offset by increases in gross interactive revenue of $1,890,000, non-spot revenue of $679,000 and gross national revenue of $385,000 from 2022.

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

The most significant decreases in gross local revenue occurred in our Charleston, South Carolina;

Columbus, Ohio;

Ithaca, New York;

Milwaukee, Wisconsin;

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

Harrisonburg, Virginia and Ocala, Florida markets.

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

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

Charleston, South Carolina;

Ithaca, New York and Yankton, South Dakota.

The most significant increases in gross national revenue occurred in our Charleston, South Carolina;

Charlottesville, Virginia;

Des Moines, Iowa;

Ocala, Florida and Springfield, Massachusetts markets.

Station operating expense was $90,199,000 for the year ended December 31, 2023, compared with $87,537,000 for the year ended December 31, 2022, an increase of $2,662,000 or 3.0%.

The increase in operating expenses was primarily a result of increases in compensation-related expenses, healthcare costs, sales survey expenses, utility expenses, building maintenance and repairs, and programming rights expenses of $1,605,000, $469,000, $314,000, $248,000, $235,000, and $172,000, respectively, partially offset by decreases in commission expenses of $383,000 from 2022.

We had operating income for the year ended December 31, 2023 of $11,488,000 compared to $13,070,000 for the year ended December 31, 2022, a decrease of $1,582,000.

The decrease was a result of the decrease in net operating revenue and the increase in station operating expense, described above, a increase in other operating expense of $134,000 partially offset by a decrease in our corporate general and administrative expenses of $3,334,000 or 23.3%.

We recorded a loss on sale of fixed assets of $120,000 in 2023 compared to a gain on sale of fixed assets of $14,000 in 2022.

The decrease in corporate general and administrative expenses was primarily attributable to the $3.8 million expense recorded in the third quarter of 2022 related the employment agreement we had with our founder and former CEO, Mr.

Christian, that was required upon his death.

Additionally, we had a decrease of $1,020,000 in compensation-related expense partially offset by increase of $416,000 in insurance costs, $407,000 in directors’ fees, $379,000 in legal and other consulting fees, and $30,000 in travel and seminar related expenses.

We generated net income of $9,500,000 ($1.55 per share on a fully diluted basis) during the year ended December 31, 2023, compared to $9,202,000 ($1.52 per share on a fully diluted basis) for the year ended December 31, 2022, an increase of $298,000.

The increase in net income is due to the decrease of operating income, described above, an increase in interest expense of $43,000, a decrease of other income of $533,000 offset by an increase in interest income of $1,031,000 and a decrease in income taxes of $1,425,000.

The increase in interest expense is due to an increase in the interest rates attributable to our unused commitment fees and amortization of bank fees.

The decrease in other income is primarily due to reimbursements from the FCC related to their spectrum auction of $115,000 in 2023 versus insurance proceeds in 2022 of $535,000 and reimbursements from the FCC related to their spectrum auction of $116,000 in 2022 as described in footnote 16 (Other Income).

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 decreased in net income before income tax combined with the increase in rate in 2022 as a result of the permanent difference between book and taxable income related to the compensation paid to our founder and former CEO as described above and in footnote 6 (Income Taxes).

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

For the year ended December 31, 2022, consolidated net operating revenue was $114,893,000 compared with $108,343,000 for the year ended December 31, 2021, an increase of $6,550,000 or 6.0%.

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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 6 (Income Taxes).

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

For the year ended December 31, 2021, consolidated net operating revenue was $108,343,000 compared with $95,813,000 for the year ended December 31, 2020, an increase of $12,530,000 or 13.1%.

The increase in revenue in 2021 was attributable to lower-than-normal revenue in 2020 due to the COVID-19 pandemic.

We had increases in gross local revenue of $12,209,000, gross interactive revenue of $2,921,000, non-spot gross revenue of $1,484,000, gross national revenue (excluding national political revenue) of $819,000, and gross barter revenue of $236,000 partially offset by a decrease in gross political revenue of $5,104,000 from 2020.

The increase in gross local, gross national and gross barter revenue occurred in the majority of our markets as a result of the impact of the COVID-19 pandemic and the disruption to our advertiser’s businesses in 2020, in contrast with the economic recovery that had begun to take place in 2021.

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

The increase in non-spot gross revenue was primarily due to us starting to host events again in 2021, whereas the number of events being held in 2020 due to the COVID-19 pandemic was relatively very few.

The decrease in gross political revenue was due to fewer national, state and local elections in 2021 versus 2020 in the majority of our markets.

Station operating expense was $83,245,000 for the year ended December 31, 2021, compared with $81,586,000 for the year ended December 31, 2020, an increase of $1,659,000 or 2.0%.

The increase in operating expenses was primarily a result of increases in sales rating survey expenses, commission expense, barter expenses, interactive services expenses, healthcare costs and promotional expenses of $1,836,000, $1,035,000, $362,000, $331,000, $210,000, and $173,000, respectively, partially offset by decreases in compensation related expenses, depreciation and amortization expenses, and bad debt expense of $1,698,000, $754,000 and $364,000, respectively, from 2020.

We had operating income for the year ended December 31, 2021 of $15,051,000 compared to an operating loss of $1,249,000 for the year ended December 31, 2020, an increase of $16,300,000.

The increase was a result of the increase in net operating revenue partially offset by the increase in station operating expense, described above, a non-cash impairment charge of $5,149,000 in 2020 versus no impairment charge in 2021, and a decrease in our corporate general and administrative expenses of $1,534,000 or 13.3%, offset by a decrease in other operating income of $1,254,000 due to a gain on the sale of land and a building at one of our tower sites in Bellingham, Washington for $1,400,000 in 2020.

The decrease in corporate general and administrative expenses was primarily attributable to decreases in non-cash compensation related expenses, legal expenses, and contribution expenses of $886,000, $323,000, and $158,000 respectively.

We generated net income of $11,157,000 ($1.85 per share on a fully diluted basis) during the year ended

December 31, 2021, compared to a net loss of $1,913,000 ($ (0.32) per share on a fully diluted basis) for the year ended December 31, 2020, an increase of $13,070,000.

The increase in net income was due to the increase of operating income, described above, a decrease in interest expense of $56,000 and an increase in other income of $401,000, partially offset by an increase in income taxes of $3,555,000, and a decrease in interest income of $132,000.

The decrease in interest expense was due to the decrease in our debt outstanding partially offset by an increase in our interest rates.

The increase in other income was primarily due to insurance proceeds for weather-related damages.

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

Liquidity and Capital Resources

Debt Arrangements and Debt Service Requirements

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

Morgan Securities LLC (collectively, the “Lenders”).

The Credit Facility consisted of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and originally matured on August 18, 2020.

On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility, (the “Second Amendment”), which had first been amended on September 1, 2017, extending the revolving credit maturity date under the Credit Agreement for five years after the date of the amendment to June 27, 2023.

On July 1, 2019, we elected to reduce our Revolving Credit Facility to $70 million.

On May 11, 2020, as part of our reincorporation as a Florida corporation, we entered into an assumption agreement and amendment of loan documents.

The amendment also included an alternative benchmark rate as a replacement to LIBOR.

On November 1, 2021, we elected to further reduce our Revolving Credit Facility to $50 million.

On December 19, 2022, we entered into a Third Amendment to our Credit Facility, (the “Third Amendment”), which extended the maturity date to December 19, 2027, reduced the lenders to JPMorgan Chase Bank, N.A., and the Huntington National Bank, established an interest rate equal to the secured overnight financing rate (“SOFR”) as administered by the SOFR Administrator (currently established as the Federal Reserve Bank of New York) as the interest base and increased the basis points.

On December 19, 2022, we entered into a Third Amendment to our Credit Facility, (the “Third Amendment”), which extended the maturity date to December 19, 2027, reduced the lenders to JPMorgan Chase Bank, N.A., and the Huntington National Bank (collectively, the “Lenders”), established an interest rate equal to the secured overnight financing rate (“SOFR”) as administered by the SOFR Administrator (currently established as the Federal Reserve Bank of New York) as the interest base and increased the basis points.

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.

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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 Credit Facility.

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

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.

After we paid down our debt and reduced our Revolving Credit Facility as noted above, we had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at December 31, 2022.

We had no debt outstanding at December 31, 2022 or December 31, 2023.

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

Sources and Uses of Cash

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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 December 31, 2022, we have repurchased 2.2 million shares of our Class A Common Stock for $57.6 million.

From the Buy-Back Program’s inception in 1998 through December 31, 2023, we have repurchased 2.2 million shares of our Class A Common Stock for $57.8 million.

During the year ended December 31, 2023, approximately 11,274 shares were retained for payment of withholding taxes for $226,781 related to the vesting of restricted stock.

Given the unprecedented uncertainty surrounding the COVID-19 virus and the resulting economic issues we halted the directions for any additional buybacks under our plan in 2020.

We halted the directions 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.

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We anticipate capital expenditures in 2024 to be approximately $5.0 million to $5.5 million, which we expect to finance through funds generated from operations.

On February 13, 2024, we entered into an agreement to purchase the assets of WKOA (FM), WKHY (FM), WASK (FM), WXXB (FM), WASK (AM) and W269DJ from Neuhoff Communications, Inc.

serving the Greater Lafayette, Indiana radio market for $5.3 million which we expect to finance through funds generated from operations or borrowings under our credit agreement.

We expect to close on this acquisition in the second quarter of 2024.

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

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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 January 2, 2020, we closed on an agreement to purchase W295BL from Basic Holdings, LLC, for an aggregate purchase price of $200,000, of which $10,000 was paid in 2019 and the remaining $190,000 paid in 2020.

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

On March 31, 2020, we sold land and a building in our Bellingham, Washington market for approximately $1,700,000 to Talbot Real Estate, LLC resulting in a $1,400,000 gain on the sale of assets.

The gain is recorded in the other operating (income) expense, net in the Company’s Consolidated Statements of Income.

On 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 Classes A Common Stock.

On December 7, 2023, the Company’s Board of Directors declared a special cash dividend of $2.00 per share on its Classes A Common Stock.

This dividend, totaling approximately $12,500,000, was paid on January 12, 2024 to shareholders of record on December 20, 2023 and is recorded in dividends payable in our Consolidated Balance Sheet at December 31, 2023.

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.

On November 16, 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 December 15, 2023 to shareholders of record on November 27, 2023.

On September 27, 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 November 3, 2023 to shareholders of record on October 11, 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.

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 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 $13,600,000, was paid on October 21, 2022 to shareholders of record on October 3, 2022.

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The Company had previously temporarily suspended the quarterly cash dividend in response to the uncertainty of the ongoing impact of COVID-19 as of June 18, 2020.

On March 4, 2020, our Board of Directors declared a regular cash dividend of $0.32 per share on its Classes A and B Common Stock.

This dividend, totaling approximately $1.9 million, was paid on April 10, 2020 to shareholders of record on March 16, 2020 and funded by cash on the Company’s balance sheet.

On December 11, 2019, our Board of Directors declared a quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock.

This dividend totaling approximately $1.8 million was paid on January 17, 2020 to shareholders of record on December 27, 2019 and funded by cash on the Company’s balance sheet.

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

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Treasury Bills to be held to maturity with maturity dates between July 2022 and February 2023.

During the year $8 million of those $10 million were redeemed and we used the proceeds to purchase an additional $8 million of U.S.

During 2022, $8 million of those $10 million were redeemed and we used the proceeds to purchase an additional $8 million of U.S.

Treasury Bills to be held to maturity.

At December 31, 2022, we had 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.

During 2023, we used the proceeds from our U.S.

Treasury Bills to purchase additional U.S.

Treasury Bills when they were up for redemption at various times through the year.

We redeemed $20.7 million in U.S.

Treasury Bills and purchase an additionally $20.7 million in U.S.

Treasury Bills.

At December 2023, we have recorded $10.6 million of held-to-maturity U.S.

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Our held-to-maturity U.S.

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

Treasury Bills all have original maturity dates ranging from March 2024 to July 2024.

We continue to actively seek and explore opportunities for expansion through the acquisitions of additional broadcast properties.

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(2) Includes $13,708,000 in obligations under employment agreements and contracts with on-air personalities, other employees, and our President, and CEO, Christopher S.

Forgy and $5,300,000 in obligations under the asset purchase agreement for the acquisition of radio stations in the Lafayette, Indiana market.

We anticipate that the above contractual cash obligations will be financed through funds generated from operations or additional borrowings under our Credit Facility, or a combination thereof.

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104, Topic 13, Revenue Recognition Revised and Updated and the Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers .

Carrying Value of Accounts Receivable and Related Allowance for Doubtful Accounts:

Carrying Value of Accounts Receivable and Related Allowance for Credit Losses:

We evaluate the collectability of our accounts receivable based on a combination of factors.

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There was no impairment of broadcast licenses in 2021, 2022 or 2023.

During 2020, we recognized a $5,149,000 impairment charge ($1,392,000 in the third quarter of 2020 and $3,757,000 in the second quarter of 2020) for broadcast license due to a decrease in projected revenue in the markets listed below due to the impact of the COVID-19 pandemic, an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market.

We were starting to see increased revenue from our low point in the second quarter of 2020, however, they were not at the previously expected recovery rate.

Our third quarter 2020 impairment charge related to our Bellingham, Washington;

Champaign, Illinois;

Charleston, South Carolina;

Columbus, Ohio;

Harrisonburg, Virginia;

Mitchell, North Dakota;

Spencer, Iowa and Springfield, Illinois markets.

Our second quarter 2020 impairment charge related to our Bucyrus, Ohio;

Champaign, Illinois;

Charleston, South Carolina;

Columbus, Ohio;

Harrisonburg, Virginia;

Hilton Head, South Carolina;

Mitchell, South Dakota;

and Ocala, Florida markets.

We also reviewed our value of goodwill and other long-lived assets as of June 30, 2020 and September 30, 2020, noting no impairment in goodwill or other long-lived assets.

Please refer to Note 3 — Broadcast Licenses, Goodwill and Other Intangible Assets, in the accompanying notes to the consolidated financial statements for a discussion of several key assumptions used in the fair value estimate of our broadcast licenses during 2020 impairment tests.

We believe our estimate of the value of our broadcast licenses is a critical accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses assumptions that incorporate variables based on past experiences and judgments about future operating performance of our stations.

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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-K

Item 7. Management’s Discussion and Analysis