# Saga Communications Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Saga Communications Inc](/companies/sga.md) (CIK 886136)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 16:00 ET
- Period: 2023-09-30
- Accession: 0001558370-23-018553
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/886136/000155837023018553/sga-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/886136/000155837023018553/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $3.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $8.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $44.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $130.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $2.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $2.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $7.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.45 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.15 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.45 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.15 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 6,032,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 6,031,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $13.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $3.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $16.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-09-30 | $31.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $61.2m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $234.4m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $18.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $52.4m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $0 | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $181.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 35,913 characters.

### Forward-Looking Statements

This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the radio broadcasting industry, the economy, and the Company. Words such as “anticipates,” “believes,” “can,” “could,” “endeavors” “expects,” “intends,” “is likely,” “may,” “plans,” “projects,” “seeks,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. We undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.

Future Factors include, among others, adverse changes in interest rates and interest rate relationships; our financial leverage and debt service requirements; dependence on key personnel; dependence on key stations; U.S. national and local economic conditions or an economic recession; market volatility; demand for our services; the degree of competition by traditional and non-traditional competitors; our ability to successfully integrate acquired stations; regulatory requirements; governmental and regulatory policy changes; changes in tax laws; the impact of technological advances; risks associated with cyber-attacks on our computer systems and those of our vendors; the outcomes of contingencies; trends in audience behavior; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, the failure to meet client or listener expectations and other facts; changes in local real estate values; natural disasters; terrorist attacks; the wars in Ukraine and Middle East, the effects of widespread outbreak of illness or disease, inflation; increased energy costs; and risk factors described in our annual report on Form 10-K for the year ended December 31, 2022 or in this Report. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.

### Introduction

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere herein and the audited financial statements and Management’s Discussion and Analysis contained in our annual report on Form 10-K for the year ended December 31, 2022. The following discussion is presented on a consolidated basis.

### Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP), which require us to make estimates, judgments and assumptions that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures and contingencies. We evaluate estimates used in preparation of our financial statements on a continual basis. There have been no significant changes to our critical accounting policies that are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our annual report on Form 10-K for the year ended December 31, 2022.

We use certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP) to assess our financial performance. For example, we evaluate the performance of our markets based on “station operating income” (operating income plus corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets). Station operating income is generally recognized by the broadcasting industry as a measure of performance, is used by analysts who report on the performance of the broadcasting industry and serves as an indicator of the market value of a group of stations. In addition, we use it to evaluate individual stations, market-level performance, overall operations and as a primary measure for incentive based compensation of executives and other members of management. Station operating income is not necessarily indicative of amounts that may be available to us for debt service requirements, other commitments, reinvestment or other discretionary uses. 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.

### Financial Condition and Results of Operations

### General

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties. We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. We review acquisition opportunities on an ongoing basis. For additional information with respect to acquisitions, see “Liquidity and Capital Resources” below. 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 of our former CEO, Edward Christian and payments required as a result of his death. This reduction will be partially offset, however, by an increase in directors’ fees of $312,000 and by investments we have made in additional corporate personnel directly attributable to sales and training initiatives.

### Radio Stations

Our radio stations’ primary source of revenue is from the sale of advertising for broadcast on our stations. Depending on the format of a particular radio station, there are a predetermined number of advertisements available to be broadcast each hour.

Most advertising contracts are short-term and generally run for a few weeks only. The majority of our revenue is generated from local advertising, which is sold primarily by each radio market’s sales staff. For the nine months ended September 30, 2023 and 2022, approximately 90% 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.

Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. Furthermore, we expect political revenue in 2023 to decrease from 2022 levels as a result of fewer elections at the national, state and local levels.

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

The broadcasting industry and advertising in general, is influenced by the state of the overall economy, including unemployment rates, inflation, energy prices and consumer interest rates. Our stations primarily broadcast in small to midsize markets. Historically, such markets have been more stable than major metropolitan markets during downturns in advertising spending, but may not experience increases in such spending as significant as those in major metropolitan markets in periods of economic improvement.

Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers. In a number of our markets, this is measured by periodic reports generated by independent national rating services. In the remainder of our markets it is measured by the results advertisers obtain through the actual running of an advertising schedule. Advertisers measure these results based on increased demand for their goods or services and/or actual revenues generated from such demand. Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media, and signal strength.

When we acquire and/or begin to operate a station or group of stations we generally increase programming and advertising and promotion expenses to increase our share of our target demographic audience. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years. During periods of economic downturns, or when the level of advertising spending is flat or down across the industry, this strategy may result in the appearance that our cost of operations is increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired station or group of stations.

The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by the format of a particular radio station. Our stations strive to maximize revenue by constantly managing the number of commercials available for sale and adjusting prices based upon local market conditions and ratings. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of inventory sell-out ratios and pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Our radio stations employ a variety of programming formats. We periodically perform market research, including music evaluations, focus groups and strategic vulnerability studies. Because reaching a large and demographically attractive audience is crucial to a station’s financial success, we endeavor to develop strong listener loyalty. Our stations also employ audience promotions to further develop and secure a loyal following. 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, sales survey and ratings expenses, health insurance expense, programming expenses including music licensing fees, 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. These new technologies and media are gaining advertising share against radio and other traditional media.

We are continuing to expand our digital initiative to provide a seamless experience across multiple platforms. Our goal is to allow our listeners to connect with our brands on demand, wherever, however and whenever they choose. 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 nine months ended September 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, our Columbus, Ohio; Des Moines, Iowa; Milwaukee, Wisconsin; Norfolk, Virginia; and Portland, Maine markets, when combined, represented approximately 36%, 38%, 38% and 39%, 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.

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

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Market: ​ | ​ ​ Percentage of Consolidated Net Operating Revenue for the Nine Months Ended September 30, 2023 ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ Percentage of Consolidated Net Operating Revenue for the Years Ended December 31, 2022 ​ ​ | ​ ​ ​ ​ ​ ​ ​ 2021 ​ ​ |
| --- | ---: | ---: | ---: | ---: |
| Columbus, Ohio | 9% | 10% | 10% | 10% |
| Des Moines, Iowa | 5% | 5% | 5% | 6% |
| Milwaukee, Wisconsin | 11% | 12% | 12% | 11% |
| Norfolk, Virginia | 6% | 6% | 6% | 6% |
| Portland, Maine | 5% | 5% | 5% | 6% |

During the nine months ended September 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 40%, 44%, 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:

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Market: ​ | ​ ​ Percentage of Consolidated Station Operating Income (\*) for the Nine Months Ended September 30, 2023 ​ ​ | ​ ​ ​ ​ ​ ​ 2022 ​ ​ | ​ ​ Percentage of Consolidated Station Operating Income(\*) for the Years Ended December 31, 2022 ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ ​ ​ ​ |
| --- | ---: | ---: | ---: | ---: | --- |
| Columbus, Ohio | 10% | 13% | 13% | 12% | ​ |
| Des Moines, Iowa | 4% | 4% | 4% | 5% | ​ |
| Milwaukee, Wisconsin | 13% | 15% | 14% | 12% | ​ |
| Norfolk, Virginia | 9% | 7% | 7% | 7% | ​ |
| Portland, Maine | 4% | 5% | 6% | 7% | ​ |

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

### Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

### Results of Operations

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

### Consolidated Results of Operations

*(In thousands, except percentages and per share information)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ ​ ​ $ Increase (Decrease) | ​ ​ ​ | ​ ​ ​ % Increase (Decrease) |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net operating revenue | ​ | $29,149 | ​ | $29,980 | ​ | $(831) |  | (2.8)% |
| Station operating expenses | ​ | 22,760 | ​ | 22,295 | ​ | 465 |  | 2.1% |
| Corporate general and administrative | ​ | 2,852 | ​ | 6,667 | ​ | (3,815) |  | (57.2)% |
| Other operating (income) expense, net | ​ | ​ 45 | ​ | ​ (37) | ​ | ​ 82 |  | N/M ​ |
| Operating income | ​ | 3,492 | ​ | 1,055 | ​ | 2,437 |  | 231.0% |
| Interest expense | ​ | 44 | ​ | 32 | ​ | 12 |  | 37.5% |
| Interest income | ​ | (391) | ​ | (134) | ​ | (257) |  | N/M ​ |
| Other income | ​ | — | ​ | (34) | ​ | 34 |  | N/M ​ |
| Income before income tax expense | ​ | 3,839 | ​ | 1,191 | ​ | 2,648 |  | 222.3% |
| Income tax provision | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Current | ​ | ​ 835 | ​ | 730 | ​ | 105 |  | 14.4% |
| Deferred | ​ | ​ 275 | ​ | 565 | ​ | (290) |  | (51.3)% |
| ​ | ​ | 1,110 | ​ | 1,295 | ​ | (185) |  | (14.3)% |
| Net income (loss) | ​ | $2,729 | ​ | $(104) | ​ | $2,833 |  | (2,724.0)% |
| Earnings per share (diluted) | ​ | $0.45 | ​ | $(0.01) | ​ | $0.46 |  | (4,600.0)% |

N/M = Not Meaningful

For the three months ended September 30, 2023, consolidated net operating revenue was $29,149,000 compared with $29,980,000 for the three months ended September 30, 2022, a decrease of $831,000 or 2.8%. We had decreases in gross local revenue of $1,052,000 and gross political revenue of $624,000, partially offset by increases in gross interactive revenue of $696,000 and gross non-spot revenue of $156,000, from the third quarter of 2022. The decrease in gross local revenues was attributable to decreases at our Charleston, South Carolina; Clarksville, Tennessee; Columbus, Ohio; Milwaukee, Wisconsin; and Portland, Maine markets. The gross political revenue decreased due to a decrease in the number of national, state and local elections. The increase in gross interactive revenue is primarily due to an increase in our streaming revenue. The most significant increases in gross non-spot revenue occurred in our Asheville, North Carolina; Charleston, South Carolina; Ithaca, New York; Norfolk, Virginia and Yankton, South Dakota markets.

Station operating expense was $22,760,000 for the three months ended September 30, 2023, compared with $22,295,000 for the three months ended September 30, 2022, an increase of $465,000 or 2.1%. The increase in operating expense was primarily a result of increases in compensation-related expense, healthcare costs, sales rating survey expenses, utility expenses, building maintenance and repairs, and programming rights expenses, of $331,000, $211,000, $107,000, $87,000, $82,000 and $71,000, respectively, partially offset by a decrease in commission expenses of $360,000, from the third quarter of 2022.

We had operating income for the three months ended September 30, 2023 of $3,492,000 compared to $1,055,000 for the three months ended September 30, 2022, an increase of $2,437,000. The increase in operating income was the result of a decrease in corporate general and administrative expenses of $3,815,000 partially offset by a decrease in net operating revenue and increase in station operating expense, noted above, and an increase in other operating (income) expense, net of $82,000. In the third quarter of 2022, we recorded a gain on sale of fixed assets of $37,000 compared to a loss on the sale of fixed assets in the third quarter of 2023 of $45,000 in other operating (income) expense, net. The decrease in corporate general and administrative expenses was primarily due to the $3.8 million expense recorded in the third quarter of 2022 related to 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 $471,000 in compensation-related expense offset by an increase of $156,000 in travel and seminar related expenses, $150,000 in other legal and consulting fees, $104,000 in directors’ fees, and $43,000 in insurance costs.

We generated net income of $2,729,000 ($0.45 per share on a fully diluted basis) during the three months ended September 30, 2023, compared to a net loss of $104,000 ( ($0.01 ) per share on a fully diluted basis) for the three months ended September 30, 2022, an increase of $2,833,000. The increase in net income is primarily due to the increase in operating income, described above, an increase in interest income of $257,000 and a decrease in income tax expense of $185,000 partially offset by an increase in interest expense of $12,000 and a decrease in other income of $34,000. 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 permanent difference between book and taxable income related to the compensation paid to our founder and former CEO as described above and in footnote 8 (Income Taxes). The increase in interest expense is due to an increase in interest rates and amortization of bank fees. The decrease in other income is due to minimal other income earned in the third quarter of 2022 versus no other income earned in the third quarter of 2023.

### Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

### Results of Operations

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

*(In thousands, except percentages and per share information)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ ​ ​ $ Increase (Decrease) | ​ ​ ​ | ​ ​ ​ % Increase (Decrease) |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net operating revenue | ​ | $83,628 | ​ | $84,768 | ​ | $(1,140) |  | (1.3)% |
| Station operating expenses | ​ | 66,870 | ​ | 64,649 | ​ | 2,221 |  | 3.4% |
| Corporate general and administrative | ​ | 7,940 | ​ | 11,970 | ​ | (4,030) |  | (33.7)% |
| Other operating (income) expense, net | ​ | ​ 125 | ​ | ​ 3 | ​ | ​ 122 |  | N/M ​ |
| Operating income | ​ | 8,693 | ​ | 8,146 | ​ | 547 |  | 6.7% |
| Interest expense | ​ | 130 | ​ | 96 | ​ | 34 |  | 35.4% |
| Interest income | ​ | (1,027) | ​ | (187) | ​ | (840) |  | N/M ​ |
| Other income | ​ | (119) | ​ | (36) | ​ | (83) |  | N/M ​ |
| Income before income tax expense | ​ | 9,709 | ​ | 8,273 | ​ | 1,436 |  | 17.4% |
| Income tax provision | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Current | ​ | ​ 2,020 | ​ | 2,390 | ​ | (370) |  | (15.5)% |
| Deferred | ​ | ​ 690 | ​ | 960 | ​ | (270) |  | (28.1)% |
| ​ | ​ | 2,710 | ​ | 3,350 | ​ | (640) |  | (19.1)% |
| Net income (loss) | ​ | $6,999 | ​ | $4,923 | ​ | $2,076 |  | 42.2% |
| Earnings per share (diluted) | ​ | $1.15 | ​ | $0.82 | ​ | $0.33 |  | 40.2% |

N/M = Not Meaningful

For the nine months ended September 30, 2023, consolidated net operating revenue was $83,628,000 compared with $84,768,000 for the nine months ended September 30, 2022, a decrease of $1,140,000 or 1.3%. We had decreases in gross local revenue of $2,003,000, gross political revenue of $1,229,000, and gross barter revenue of $92,000 and an increase in agency commissions of $50,000 partially offset by increases in gross interactive revenue of $1,233,000, gross non-spot revenue of $582,000 and gross national revenue of $512,000, from 2022. The decrease in gross local revenues was attributable to decreases at our Charleston, South Carolina; Clarksville, Tennessee; Columbus, Ohio; Des Moines, Iowa; Ithaca, New York; Milwaukee, Wisconsin; Portland, Maine and Springfield, Illinois markets partially offset by increases at our Asheville, North Carolina; Bellingham, Washington; Charlottesville, Virginia and Harrisonburg, Virginia markets. The gross political revenue decreased due to a decrease in the number of national, state and local elections. The decrease in our gross barter revenue is due to minor decreases in the majority of our markets. The increase in agency commissions is due to increases in our national 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 Charleston, South Carolina; Charlottesville, Virginia; Des Moines, Iowa; Norfolk, Virginia; Ocala, Florida and Springfield, Massachusetts markets. The most significant increases in gross non-spot revenue occurred in our Asheville, North Carolina; Bellingham, Washington; Charleston, South Carolina; Ithaca, New York and Yankton, South Dakota markets.

Station operating expense was $66,870,000 for the nine months ended September 30, 2023, compared with $64,649,000 for the nine months ended September 30, 2022, an increase of $2,221,000 or 3.4%. The increase in operating expense was primarily a result of increases in compensation-related expense, utility expenses, building maintenance and repairs, healthcare costs, sales rating survey expenses, programming rights expense, and music licensing fees, of $1,219,000, $274,000, $273,000, $213,000, $194,000, $184,000, and $89,000, respectively, partially offset by commission expenses of $199,000 for the comparable period of 2022.

We had operating income for the nine months ended September 30, 2023 of $8,693,000 compared to $8,146,000 for the nine months ended September 30, 2022, an increase of $547,000. The increase in operating income was the result of a decrease in corporate general and administrative expenses of $4,030,000 partially offset by a decrease in net operating revenue and increase in station operating expense, noted above, and an increase in other operating (income) expense, net of $122,000. We recorded a loss on sale of fixed assets of $125,000 in 2023 compared to a loss on the sale of fixed assets in the 2022 of $3,000 in other operating (income) expense, net. The decrease in corporate general and administrative expenses was primarily due to the $3.8 million expense recorded in the third quarter of 2022 related to 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 $1,219,000 in compensation-related expense partially offset by an increase of $345,000 in other consulting fees, $202,000 in directors’ fees, $145,000 in insurance costs and $32,000 in travel and seminar related expenses.

We generated net income of $6,999,000 ($1.15 per share on a fully diluted basis) during the nine months ended September 30, 2023, compared to $4,923,000 ($0.82 per share on a fully diluted basis) for the nine months ended September 30, 2022 ended, an increase of $2,076,000. The increase in net income is primarily due to the increase in operating income, described above, an increase in interest income of $840,000, an increase in other income of $83,000 and a decrease in income tax expense of $640,000, partially offset by an increase in interest expense of $34,000. 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 permanent difference between book and taxable income related to the compensation paid to our founder and former CEO as described above and in footnote 8 (Income Taxes). 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 increase in interest expense is due to an increase in interest rates and amortization of bank fees.

### Liquidity and Capital Resources

### Debt Arrangements and Debt Service Requirements

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 (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.

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. These debt issuance costs are included in other assets, net in the consolidated balance sheets. As a result of the Second Amendment, the Company incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized. As a result of the Third Amendment, the Company incurred an additional $161,000 of transaction fees related to the Credit Facility that were capitalized. 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 (5.31% at September 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 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 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 September 30, 2023.

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

### Sources and Uses of Cash

During the nine months ended September 30, 2023 and 2022, we had net cash flows from operating activities of $13,921,000 and $14,362,000, 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. There can be no assurance that we would be able to effect any such transactions on favorable terms, if at all.

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 September 30, 2023, we have repurchased 2.2 million shares of our Class A Common Stock for $57.6 million. During the three and nine months ended September 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 nine months ended September 30, 2023 were $3,397,000 ($4,731,000 in 2022). We anticipate capital expenditures in 2023 to be approximately $4.5 million to $5.0 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. & M. 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. The translators are start-up stations and therefore, have no pro forma revenue and expenses.

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 and is recorded in dividends payable in our Condensed Consolidated Balance Sheet at September 30, 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.

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.

On June 6, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1,200,000, was paid to our transfer agent on June 29, 2022. The dividend was paid by our transfer agent on July 1, 2022 to shareholders of record on June 13, 2022.

On March 1, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $970,000, was paid on April 8, 2022 to shareholders of record on March 21, 2022.

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

We anticipate that any future acquisitions of radio stations and dividend payments will be financed through funds generated from operations, borrowings under the Credit Agreement, additional debt or equity financing, cash on hand, or a combination thereof. However, there can be no assurances that any such financing will be available on acceptable terms, if at all.

### Summary Disclosures About Contractual Obligations and Commercial Commitments

We have future cash obligations under various types of contracts, including the terms of our Credit Facility, operating leases, programming contracts, employment agreements, and other operating contracts. For additional information concerning our future cash obligations see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation — Summary Disclosures About Contractual Obligations” in our annual report on Form 10-K for the year ended December 31, 2022.

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

### Recent Accounting Pronouncements

Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.

### Inflation

The impact of inflation on our operations has not been significant to date. We are, however, starting to see the effects of higher inflation starting to impact costs of most goods and services. There can be no assurance that a high rate of inflation in the future would not have an adverse effect on our operations.

## Market risk

As filed, 454 characters.

Refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk and Risk Management Policies” in our annual report on Form 10-K for the year ended December 31, 2022 for a complete discussion of our market risk. There have been no material changes to the market risk information included in our 2022 annual report on Form 10-K.

## Controls and procedures

As filed, 1,118 characters.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to cause the material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. There have been no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

## Risk factors

As filed, 196 characters.

There have been no material changes to the risk factors previously disclosed in response to Part 1, “Item 1A. Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2022.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-018553. Last ingested by Listed: Oct 24, 2026, 14:59 ET. No prices; not investment advice.