Saga munications(SGA) - 2020 Q4 - Annual Report

Part I Business Saga Communications acquires, develops, and operates broadcast properties, focusing on achieving top ratings and advertising revenues in mid-sized markets - As of February 28, 2021, the company owned 79 FM stations, 35 AM radio stations, and 79 metro signals, serving 27 markets[14] - The company's strategy focuses on operating top-billing radio stations in mid-sized markets, specifically those ranked 20 to 200 by the Investing in Radio Market Report[22] Revenue Source Breakdown (Fiscal Year 2020) | Revenue Source | Gross Revenue | Percentage of Total | | :--- | :--- | :--- | | Local Advertising | $86,562,000 | 84% | | National Advertising | $16,361,000 | 16% | - The business is subject to extensive regulation by the Federal Communications Commission (FCC), governing license renewals, ownership limits, and programming content[39] - As of December 31, 2020, the company employed approximately 607 full-time and 221 part-time employees, with no union representation[36] Risk Factors The company faces prominent risks related to the economy, financing, industry competition, regulatory oversight, technology, and stock ownership - The ongoing COVID-19 pandemic has caused significant disruptions, leading advertisers to reduce spending, adversely affecting revenue and financial forecasts[93][94] - The company's top five markets represented 39% of net operating revenue in 2020, creating exposure to adverse economic conditions in those specific areas[97] - As of December 31, 2020, the company had long-term debt of approximately $10.0 million, with credit facility covenants restricting operational flexibility and requiring cash flow for debt service[99][102] - FCC broadcasting licenses represented 37% of total assets as of December 31, 2020, with potential future impairment losses affecting operating results[109] - As of March 4, 2021, the President, CEO, and Chairman, Edward K. Christian, holds approximately 65% of the combined voting power, enabling control over most stockholder votes and company policies[117] Unresolved Staff Comments The company reports that there are no unresolved staff comments - None[119] Properties The company's properties include offices, studios, and transmitter/antenna sites, with most facilities owned and the remainder leased - As of December 31, 2020, the company owns the facilities for 25 of its 28 operating locations, with the remaining studios, offices, and transmitter sites leased under varying terms[121] Legal Proceedings The company is subject to various claims arising in the ordinary course of business, with no anticipated material impact on financial statements - Management does not expect any outstanding legal claims to have a material impact on the company's financial statements[124] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[125] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's Class A Common Stock, dividend history, equity compensation plans, and stock repurchase activities - The company's Class A Common Stock trades on the NASDAQ Global Market under the symbol SGA, with approximately 164 holders of record as of March 4, 2021[127][128] Dividends Declared Per Share (Classes A & B) | Year | Dividend per Share | | :--- | :--- | | 2020 | $0.32 (suspended after Q1) | | 2019 | $1.20 | | 2018 | $1.45 (includes special dividend) | - The company has a stock buy-back program with approximately $18.8 million remaining for purchases as of December 31, 2020, though repurchases were suspended due to the COVID-19 pandemic[138][192] Selected Financial Data This section presents a five-year summary of key financial and operating data, reflecting a significant decrease in 2020 net operating revenue and a net loss Selected Financial Data (2018-2020) | Metric (in thousands, except per share) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net Operating Revenue | $95,813 | $123,072 | $124,829 | | Operating Income (Loss) | $(1,249) | $18,808 | $19,682 | | Net Income (Loss) | $(1,913) | $13,279 | $13,690 | | Diluted Earnings (Loss) Per Share | $(0.32) | $2.23 | $2.30 | | Total Assets | $246,488 | $252,394 | $248,477 | | Long-term Debt | $10,000 | $10,000 | $20,000 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant negative impact of the COVID-19 pandemic on 2020 revenues, cost-reduction measures, liquidity, and a $5.1 million impairment charge on broadcast licenses - The COVID-19 pandemic significantly impacted 2020 results, causing a decline in advertising spending, leading the company to delay capital expenditures, suspend share repurchases and dividends, and implement cost controls[151][153][155] Year-over-Year Financial Comparison (2020 vs. 2019) | Metric (in thousands) | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net operating revenue | $95,813 | $123,072 | $(27,259) | (22.1)% | | Station operating expense | $81,586 | $92,692 | $(11,106) | (12.0)% | | Operating income (loss) | $(1,249) | $18,808 | $(20,057) | (106.6)% | | Net income (loss) | $(1,913) | $13,279 | $(15,192) | (114.4)% | - In 2020, the company recognized a $5.1 million non-cash impairment charge for broadcast licenses due to decreased revenue projections and an increased discount rate, primarily driven by the impact of the COVID-19 pandemic[211] - As of December 31, 2020, the company had $10.0 million in long-term debt and approximately $60 million of unused borrowing capacity under its Revolving Credit Facility, maturing in June 2023[185][190] - Anticipated capital expenditures for 2021 are approximately $4.5 million to $5.5 million, expected to be financed through funds from operations[193] Quantitative and Qualitative Disclosures About Market Risk The company's earnings are affected by changes in short-term interest rates due to its long-term debt arrangements - A hypothetical 1% increase in average interest rates in 2020 would have decreased pre-tax income by $100,000[217] Financial Statements and Supplementary Data This section indicates that the company's financial statements are filed as part of the annual report - The financial statements are attached and filed as part of this annual report[221] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[222] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020[223][227] - The independent auditor, UHY LLP, provided an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2020[230] Other Information The company reports no other information for this item - None[236] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees Information for Items 10 through 14 is incorporated by reference from the company's Proxy Statement for the 2021 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2021 Proxy Statement[238][239][240] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report - This section lists the consolidated financial statements and exhibits filed with the report, with Schedule II, Valuation and Qualifying Accounts, disclosed in Note 1 to the financial statements[245][246] Financial Statements and Notes This section contains the company's audited consolidated financial statements and notes, along with an unqualified auditor's report from UHY LLP - The independent auditor, UHY LLP, issued an unqualified opinion on the consolidated financial statements, stating they are presented fairly in conformity with U.S. GAAP[250] - The auditor identified the broadcast license impairment analysis as a critical audit matter due to significant judgments and estimates made by management in determining fair value[256] - Note 3 details the $5.1 million non-cash impairment charge on broadcast licenses taken in 2020, resulting from the economic impact of the COVID-19 pandemic on revenue projections and discount rates[319][320] - Note 4 describes the company's $10.0 million long-term debt under a revolving credit facility that matures on June 27, 2023, with the company in compliance with all financial covenants as of December 31, 2020[332][336] - Note 12 discloses that as of December 31, 2020, the company had operating lease liabilities of $6.9 million with a weighted average remaining lease term of 6.5 years[381][385]