Saga munications(SGA) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial performance, market risk disclosures, and internal controls Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, reflecting a significant downturn due to COVID-19, including decreased revenue, a net loss, and an impairment charge Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $48,909 | $44,034 | | Accounts receivable, net | $10,164 | $18,962 | | Broadcast licenses, net | $91,600 | $95,311 | | Total assets | $243,053 | $252,394 | | Liabilities & Equity | | | | Total current liabilities | $14,710 | $17,501 | | Long-term debt | $10,000 | $10,000 | | Total liabilities | $54,460 | $60,042 | | Total stockholders' equity | $188,593 | $192,352 | Condensed Consolidated Statements of Operations This statement details the company's financial performance over specific periods, including revenue, expenses, and net income or loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net operating revenue | $16,866 | $32,191 | $42,917 | $60,007 | | Impairment of broadcast licenses | $3,757 | $0 | $3,757 | $0 | | Operating income (loss) | $(8,659) | $6,608 | $(6,492) | $8,573 | | Net income (loss) | $(4,911) | $4,734 | $(3,231) | $6,104 | | Diluted EPS | $(0.82) | $0.80 | $(0.54) | $1.03 | Condensed Consolidated Statements of Stockholders' Equity This statement outlines the changes in the company's total stockholders' equity over the reporting period - Total stockholders' equity decreased from $192.4 million at the end of 2019 to $188.6 million at June 30, 2020. The decrease was primarily driven by a net loss of $4.9 million in Q2 2020 and dividend payments, partially offset by stock-based compensation[14] Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,319 | $12,830 | | Net cash provided by (used in) investing activities | $313 | $(3,662) | | Net cash used in financing activities | $(3,757) | $(15,385) | | Net increase (decrease) in cash | $4,875 | $(6,217) | - Cash and cash equivalents increased to $48.9 million at the end of the period, up from $44.0 million at the beginning of the year. The increase was driven by positive operating cash flow and proceeds from asset sales, which offset cash used for dividends and treasury stock purchases[16] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the unaudited condensed consolidated financial statements - Due to the economic impact of the COVID-19 pandemic, the company performed an impairment test and recorded a non-cash impairment charge of $3.8 million related to FCC licenses in eight markets[50][51] Disaggregation of Revenue for Six Months Ended June 30 (in thousands) | Revenue Type | 2020 | 2019 | | :--- | :--- | :--- | | Broadcast Advertising Revenue, net | $38,995 | $54,683 | | Digital Advertising Revenue | $1,567 | $1,890 | | Other Revenue | $2,355 | $3,434 | | Net Revenue | $42,917 | $60,007 | - On June 18, 2020, the Board of Directors temporarily suspended the quarterly cash dividend in response to the uncertainty of the ongoing impact of COVID-19[96] - The company has a $70 million revolving credit facility, which was amended in May 2020 to include an alternative benchmark rate to LIBOR. As of June 30, 2020, $10 million was outstanding, with approximately $60 million of unused borrowing capacity[86][94] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant negative impact of the COVID-19 pandemic on financial results, including a substantial revenue decrease, an impairment charge, and liquidity preservation measures - The COVID-19 pandemic led to numerous advertising cancellations, especially in sectors like events, automotive, and healthcare, causing a significant decline in revenue. The company anticipates Q3 2020 revenue to be 25% to 30% lower than the prior year[103][105] - In response to the pandemic, the company took several actions to protect liquidity, including delaying capital expenditures, suspending share repurchases, temporarily suspending the quarterly dividend, and implementing cost-reduction initiatives[105][107] Comparison of Operations for Three Months Ended June 30 (in thousands) | Metric | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net operating revenue | $16,866 | $32,191 | $(15,325) | (47.6)% | | Station operating expense | $18,652 | $22,879 | $(4,227) | (18.5)% | | Operating income (loss) | $(8,659) | $6,608 | $(15,267) | (231.0)% | | Net income (loss) | $(4,911) | $4,734 | $(9,645) | (203.7)% | - A $3.8 million impairment charge for broadcast licenses was recognized in Q2 2020 due to decreased revenue projections and an increased discount rate, both resulting from the COVID-19 pandemic's impact[165] - The company had approximately $60 million of unused borrowing capacity under its Revolving Credit Facility as of June 30, 2020, providing financial flexibility[152] Quantitative and Qualitative Disclosures about Market Risk This section confirms no material changes to market risk profile since the 2019 Annual Report, except for new risks related to the COVID-19 pandemic - There have been no material changes to the company's market risk profile since the 2019 Annual Report, except for risks introduced by the COVID-19 pandemic[171] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[172] - No material changes were made to the company's internal controls over financial reporting during the second quarter of 2020[172] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, updated risk factors, details on equity security sales, and a list of filed exhibits Legal Proceedings The company is involved in various legal proceedings, none of which are expected to materially affect its financial statements - Ongoing legal proceedings are not expected to have a material financial impact on the company[175] Risk Factors This section introduces new significant risk factors related to the COVID-19 pandemic, detailing its adverse impact on business operations, financial results, and cash flows - The COVID-19 pandemic and related government restrictions have adversely affected business, results of operations, and financial condition[177] - Uncertainty in the economic outlook has caused advertisers to reduce spending, and this trend may continue, negatively impacting revenue[178] - The duration and severity of the pandemic's impact are difficult to predict, and further restrictive measures could have a prolonged adverse effect on the business[180] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity for Q2 2020, noting the halt of the program due to COVID-19 related economic uncertainty Share Repurchases in Q2 2020 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value that May Yet be Purchased Under the Program(a) | | :--- | :--- | :--- | :--- | | April 1 - April 30, 2020 | — | $ — | $19,214,262 | | May 1 - May 31, 2020 | — | $ — | $19,214,262 | | June 1 – June 31, 2020 | 808 | $25.82 | $19,193,403 | - The company has halted additional buybacks under its stock repurchase plan due to the uncertainty surrounding the COVID-19 virus[60][154] Exhibits This section lists the exhibits filed with the Form 10-Q, including loan document amendments and CEO/CFO certifications - Key exhibits filed include an Assumption Agreement and Amendment of Loan Documents, CEO/CFO certifications (Rule 13a-14(a) and Section 906), and XBRL data files[183]