Saga Communications Annual Report 2019

Plain-text annual report

2019AnnualReport2019AnnualLetterToourfellowshareholders:Iamsomewhatatadisadvantagethisyearinwritingmyannualreview,specifically2019.Youhavealreadyheardabout2019inourfourearningsreleasesandconferencecallsand,withthisannualreport,youshouldhaveeverybitofinformationavailableonthestateofyourcompany.Whatmakesitespeciallydifficulttowriteisthat,asIpenthis,weareinunchartedwatersbothwiththehealthofourcountryandthehealthandeconomicdamagethatcouldoccurinourcountryonceasemblanceofnormalityhasreturned.Otherthansaying,“Wehadaprofitableyearin2019”Idon’tknowwhatmoreIcanadd.Specifically,allofoureffortsarenowonretainingexistingrevenueandCREATINGnewrevenue.Yes,wehavehadcancellations,especiallyonevents,venues,sports,highticketitems,healthcare,automotive,andmore.Ontheotherhand,wehavebeensuccessfulincreatingeffectivenewadvertisingthatanswersthe“why’s”and“how’s”acompanyshouldstayactiveinadvertising.Wehaveliterallyinventedfreshandinnovativereasonsformanycompaniestostayopen.SofarthebreechisholdingandIbelievethatwecancontinuetoholdthelinesothat2020remainsasoftbut“respectable”yearforSagaCommunications.WhatIcantellyouisthatouremployeesareallworkingdiligentlytobothserveandinformourcommunities.Itisapassionthateachofthemholdsasabroadcasterwithresponsibilitiesthathavebecomeapersonalcommitment.Itmaybesomewhatunusual,butIwouldliketosharewithyouthee-mailbelowthatIwasabletosendtoall1,000plusSagaemployees:LetmestartbythankingeachandeveryoneofyouforyourcommitmentnotonlytoSagabuttoRADIO.WhenyousignedonwithSagayoumaynothaverealizedthatyoualsoagreedandunderstoodthemeaningofthetermsofourbroadcastlicenses.Letmeonceagainshareitwithyou:47U.S.Code§309-Applicationforlicense|U.S.CodedirectfromtheFederalRadioCommission(thepredecessoroftheFCC):https://www.law.cornell.edu/uscode/text/47/309.Subjecttotheprovisionsofthissection,theCommissionshalldetermine,inthecaseofeachapplicationfiledwithittowhichsection308ofthistitleapplies,whetherthepublicinterest,convenience,andnecessitywillbeservedbythegrantingofsuchapplication,and,iftheCommission,uponexaminationofsuchapplicationanduponconsiderationofsuchothermattersastheCommissionmayofficiallynotice,shallfindthatpublicinterest…RightnowNECESSITYistheoperativeword.Wehavebeenchargedwithbeingthevoiceofreasonandinformationforourcommunitiesanditisanawesomeresponsibility.Infact,thegovernmenthasdesignatedbroadcastersasfirstresponders.HereispartofthereleasefromtheUSGovernment:TheRoleofFirstRespondersEmergencyrespondersknowthatdisastersandmassviolenceeventscancauseimmenseamountsoftraumaticphysicalandemotionalpain.Respondersoftenareidentifiedasindividualswhocanhelptreatandstabilizemedicalneedsorprovidedirectiononhowtogettosafetyduringacrisis.Thismeanstheiractionsandwordshavegreatinfluenceonpeoplewhoneedassistance.Inordertobemostsuccessfulinprovidingcareandsafetyinemergencysituations,itisimportanttouseeffectiveandefficientcommunicationstrategieswiththoseseekinghelp.Thefollowingcommunicationstrategiescanhelprespondersgaintrustandreduceanxietyinthosebeingtreatedandachievebetterphysicalandemotionaloutcomesforpatientsandsaferconditionsforall.Thisisallofyou.Youarepartofadevicethattranslateswordsintoairandallowsyourpublictohear,understand,andbecalm.BybeingpartofSaga,youtoohavecommittedtothis.Withthissaid,aradiostationisacombined,cooperativeeffort.Ifonepartbreaksdown,itdoesimpactourmission.Everypersoninyourradiostation(s)ispartofthetapestrythatisradio.Youareindeedinterwovenintothefabric,andthatmightbehardtocomprehendbecauseyoucan’tseeit…butyoucanHEARourfabric,loudandstrong.Ifwelookbackover100years,radiohashadaprofoundeffectontheUS.Itgoesanywhere.IhaveincludedthreequotesfromFranklinDelanoRoosevelt--twoIwillsharenow,onelater.Bothwerebroadcastonradio,andI’mcertainalsoonmanyofourownAMstationsthathavebeenontheairmorethan82years:FRANKLIND.ROOSEVELT,FirstInauguralAddress,Mar.4,1932“Theonlythingwehavetofearisfearitself--nameless,unreasoning,unjustifiedterrorwhichparalyzesneededeffortstoconvertretreatintoadvance.”FRANKLIND.ROOSEVELT,speechatMarietta,Ohio,Jul.8,1938“ThisgreatNationwillendureasithasendured,willreviveandwillprosper.”Weindeedwillgetthroughthesetimes.Sagahasbeenbuiltonastrongfoundationand,unlikeotherbroadcastcompanies,hasnotsolditssoulandeconomicfutureforself-aggrandizement.Allofyouhavehelpedbuildacompanythathaswithstooddifficulttimesbefore.Whenotherradiocompaniesperished,wecontinuedwithmodestgrowth.Allofthiswasachievedwithsomeverysimplethoughtssuchas“Docompellingradio”“Super-serveyourcommunities”(nevermoreimportantthatrightnow)“Writeandselleffectiveadvertising”(yeah,thattooisimportantnow)and,aboveallelse,“Neverforgetthatyoudogoodthingsandyouarepartofallthingsgoodthatcomeoverourairwaves.”Weareacollectiveandacollectivewithapurpose.Again,Ipersonallywanttothankyouforallyoureffortsonbehalfofourpassionforradio.IknowthatmanyofyouareawarethatIamofIcelandicheritage.ThosethathaveheardthisbeforeknowwhywenamedthecompanySaga.InIceland,Sagasarelongbooksofdaringdo.Inessence,aSagaisan“onongoingadventure.”Weallshareinthisadventurethatwearegoingthroughnow….andwilllookbackandtellstoriesaboutittoourfamilies.AndasImentionedabove….onelastquotefromFRANKLIND.ROOSEVELT,ThirdInauguralAddress,Jan.20,1941:“Besincere,bebrief,beseated.”EdChristianUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONWashington,D.C.20549Form10-K(Markone)☒ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934ForthefiscalyearendedDecember31,2019OR☐TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934ForthetransitionperiodfortoCommissionfilenumber1-11588SAGACOMMUNICATIONS,INC.(Exactnameofregistrantasspecifiedinitscharter)Delaware(Stateorotherjurisdictionofincorporationororganization)38-3042953(I.R.S.EmployerIdentificationNo.)73KerchevalAvenueGrossePointeFarms,Michigan(Addressofprincipalexecutiveoffices)48236(ZipCode)Registrant’stelephonenumber,includingareacode:(313)886-7070SecuritiesregisteredpursuanttoSection12(b)oftheAct:TitleofeachclassTradingSymbolNameofeachexchangeonwhichregisteredClassACommonStock,$.01parvalueSGANASDAQSecuritiesregisteredpursuanttoSection12(g)oftheAct:NoneIndicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.Yes☐No☒IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.Yes☐No☒Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.Yes☒No☐IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).Yes☒No☐Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,orasmallerreportingcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler”and“smallerreportingcompany”inRule12b-2oftheExchangeAct.Largeacceleratedfiler☐Acceleratedfiler☒Non-acceleratedfiler☐SmallerReportingCompany☐Emerginggrowthcompany☐Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.☐Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheAct).Yes☐No☒AggregatemarketvalueoftheClassACommonStockandtheClassBCommonStock(assumingconversionthereofintoClassACommonStock)heldbynonaffiliatesoftheregistrant,computedonthebasisoftheclosingpriceoftheClassACommonStockonJune30,2019ontheNASDAQ:$155,483,448.Thenumberofsharesoftheregistrant’sClassACommonStock,$.01parvalue,andClassBCommonStock,$.01parvalue,outstandingasofMarch4,2020was5,043,067and953,842,respectively.DOCUMENTSINCORPORATEDBYREFERENCEPortionsoftheProxyStatementforthe2020AnnualMeetingofStockholders(tobefiledwiththeSecuritiesandExchangeCommissionnotlaterthan120daysaftertheendoftheCompany’sfiscalyear)areincorporatedbyreferenceinPartIIIhereof.[ThisPageIntentionallyLeftBlank]SagaCommunications,Inc.2019Form10-KAnnualReportTableofContentsPagePARTIItem1.Business.........................................................1Item1A.RiskFactors......................................................20Item1B.UnresolvedStaffComments...........................................24Item2.Properties........................................................24Item3.LegalProceedings...................................................24Item4.MineSafetyDisclosures..............................................24PARTIIItem5.MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities..........................................25Item6.SelectedFinancialData...............................................28Item7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations........................................................30Item7A.QuantitativeandQualitativeDisclosuresaboutMarketRisk.....................41Item8.FinancialStatementsandSupplementaryData..............................41Item9.ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure........................................................41Item9A.ControlsandProcedures..............................................41Item9B.OtherInformation..................................................44PARTIIIItem10.Directors,ExecutiveOfficersandCorporateGovernance.......................44Item11.ExecutiveCompensation..............................................44Item12.SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters.................................................44Item13.CertainRelationshipsandRelatedTransactions,andDirectorIndependence..........44Item14.PrincipalAccountantFeesandServices....................................44PARTIVItem15.ExhibitsandFinancialStatementSchedules.................................45Signatures...............................................................80iForward-LookingStatementsStatementscontainedinthisForm10-Kthatarenothistoricalfactsareforward-lookingstatementsthataremadepursuanttothesafeharborprovisionsofthePrivateSecuritiesLitigationReformActof1995.Inaddition,wordssuchas“believes,”“expects”,“anticipates,”“guidance,”andsimilarexpressionsareintendedtoidentifyforward-lookingstatements.Thesestatementsaremadeasofthedateofthisreportorasotherwiseindicated,basedoncurrentexpectations.Weundertakenoobligationtoupdatethisinformation.Anumberofimportantfactorscouldcauseouractualresultsfor2020andbeyondtodiffermateriallyfromthoseexpressedinanyforward-lookingstatementsmadebyoronourbehalf.Forward-lookingstatementsarenotguaranteesoffutureperformanceastheyinvolveanumberofrisks,uncertaintiesandassumptionsthatmayprovetobeincorrectandthatmaycauseouractualresultsandexperiencestodiffermateriallyfromtheanticipatedresultsorotherexpectationsexpressedinsuchforward-lookingstatements.Therisks,uncertaintiesandassumptionsthatmayaffectourperformance,whicharedescribedinItem1Aofthisreport,includeourfinancialleverageanddebtservicerequirements,dependenceonkeypersonnel,dependenceonkeystations,global,U.S.andlocaleconomicconditions,ourabilitytosuccessfullyintegrateacquiredstations,regulatoryrequirements,newtechnologies,naturaldisasters,terroristattacks,informationtechnologyandcybersecurityfailuresanddatasecuritybreaches.Wecannotbesurethatwewillbeabletoanticipateorrespondtimelytochangesinanyofthesefactors,whichcouldadverselyaffecttheoperatingresultsinoneormorefiscalquarters.Resultsofoperationsinanypastperiodshouldnotbeconsidered,inandofitself,indicativeoftheresultstobeexpectedforfutureperiods.Fluctuationsinoperatingresultsmayalsoresultinfluctuationsinthepriceofourstock.iiPARTIItem1.BusinessWeareabroadcastcompanyprimarilyengagedinacquiring,developingandoperatingbroadcastproperties.OnSeptember1,2017wesoldourJoplin,MissouriandVictoria,Texastelevisionstations.Thetelevisionstationsthatweresoldconstitutedourentiretelevisionsegment.Thehistoricalresultsofoperationsforthetelevisionstationsarepresentedasdiscontinuedoperationsforallperiodspresented(seeNote4).AsaresultofthesaleofourtelevisionstationsandthosestationsbeingreportedasdiscontinuedoperationsweonlyhaveonereportablesegmentatDecember31,2019,2018and2017.Unlessindicatedotherwise,theinformationintheNotestoConsolidatedFinancialStatementsrelatestoourcontinuingoperations.AsofFebruary29,2020,weownedseventy-nineFM,thirty-fourAMradiostationsandseventy-sevenmetrosignalsservingtwenty-sevenmarkets,includingBellingham,Washington;Columbus,Ohio;Norfolk,Virginia;Milwaukee,Wisconsin;Manchester,NewHampshire;andDesMoines,Iowa.ThefollowingtablesetsforthinformationaboutourradiostationsandthemarketstheyserveasofFebruary29,2020:StationMarket(a)2019MarketRankingByRadioRevenue(b)2019MarketRankingByRadioMarket(b)StationFormatTargetDemographicsFM:WKLHMilwaukee,WI3141ClassicRockAdults40-64WHQGMilwaukee,WI3141RockMen18-49WJMRMilwaukee,WI3141UrbanAdultContemporaryAdults25-54WNRGMilwaukee,WI3141ContemporaryHitsAdults18-34WSNYColumbus,OH3436AdultContemporaryWomen25-54WNNDColumbus,OH3436ClassicHitsAdults35-64WNNPColumbus,OH3436ClassicHitsAdults35-64WLVQColumbus,OH3436ClassicRockAdults40-64WVMXColumbus,OH3436HotAdultContemporaryWomen25-44WNORNorfolk,VA3945RockMen18-49WAFXNorfolk,VA3945ClassicRockAdults40-64KSTZDesMoines,IA6770HotAdultContemporaryWomen25-44KSTZ-HD2DesMoines,IA6770CountryLegendsAdults45-64KIOADesMoines,IA6770ClassicHitsAdults35-64KIOA-HD2DesMoines,IA6770ContemporaryHitsAdults18-34KAZRDesMoines,IA6770RockMen18-49KAZR-HD2DesMoines,IA6770OldiesAdults45+KOEZDesMoines,IA6770SoftAdultContemporaryWomen35-64WMGXPortland,ME7199HotAdultContemporaryWomen25-44WYNZPortland,ME7199ClassicHitsAdults35-64WPORPortland,ME7199ContemporaryCountryAdults25-54WCLZPortland,ME7199AdultAlbumAlternativeAdults25-54WAVFCharleston,SC8378AdultVarietyHitsAdults25-54WCKNCharleston,SC8378ContemporaryCountryAdults25-54WMXZCharleston,SC8378HotAdultContemporaryWomen25-44WMXZ-HD2Charleston,SC8378UrbanHitsAdults18-341StationMarket(a)2019MarketRankingByRadioRevenue(b)2019MarketRankingByRadioMarket(b)StationFormatTargetDemographicsWXSTCharleston,SC8378UrbanAdultContemporaryAdults25-54WAQYSpringfield,MA101100ClassicRockAdults40-64WLZXSpringfield,MA101100AlternativeRockMen18-49WOGKOcala-Gainesville,FL11586ContemporaryCountryAdults25-54WYNDOcala-Gainesville,FL11586ClassicRockAdults40-64WNDDOcala-Gainesville,FL11586ClassicRockAdults40-64WNDNOcala-Gainesville,FL11586ClassicRockAdults40-64WZIDManchester,NH134199AdultContemporaryWomen25-54WMLLManchester,NH134199ClassicHitsAdults35-64WZID-HD2Manchester,NH134199ContemporaryHitsAdults18-34WZID-HD3Manchester,NH134199ClassicCountryAdults45-64WOXLAsheville,NC154157AdultContemporaryWomen25-54WTMTAsheville,NC154157ClassicRockAdults40-64WTMT-HD2Asheville,NC154157ClassicHitsAdults35-64WTMT-HD3Asheville,NC154157CountryLegendsAdults45-64WOXL-HD2Asheville,NC154157AdultAlbumAlternativeAdults25-54WOXL-HD3Asheville,NC154157OldiesAdults45+WSIGHarrisonburg,VA170248ClassicCountryAdults35-64WQPOHarrisonburg,VA170248ContemporaryHitsWomen18-34WQPO-HD2Harrisonburg,VA170248OldiesAdults45+WQPD-HD3Harrisonburg,VA170248ClassicRockAdults40-64WMQRHarrisonburg,VA170248AdultContemporaryWomen25-44WWREHarrisonburg,VA170248ClassicHitsAdults35-64WNAXYankton,SD180255ContemporaryCountryAdults25-54WNAX-HD2Yankton,SD180255CountryLegendsAdults45-64KISMBellingham,WAN/AN/AClassicRockAdults40-64KAFEBellingham,WAN/AN/AAdultContemporaryWomen25-54WKVTBrattleboro,VTN/AN/AClassicHitsAdults35-64WRSYBrattleboro,VTN/AN/AAdultAlbumAlternativeAdults25-54WQELBucyrus,OHN/AN/AClassicHitsAdults35-64WLRWChampaign,ILN/AN/AHotAdultContemporaryWomen25-44WREEChampaign,ILN/AN/AClassicHitsAdults35-64WYXYChampaign,ILN/AN/AClassicCountryAdults45-64WIXYChampaign,ILN/AN/ACountryAdults25-54WIXY-HD2Champaign,ILN/AN/ARockMen18-49WIXY-HD3Champaign,ILN/AN/AContemporaryHitsAdults18-34WLRW-HD2Champaign,ILN/AN/AOldiesAdults45-64WWWVCharlottesville,VAN/AN/AClassicRockAdults40-64WQMZCharlottesville,VAN/AN/AAdultContemporaryWomen25-54WCNRCharlottesville,VAN/AN/AAdultAlbumAlternativeAdults25-542StationMarket(a)2019MarketRankingByRadioRevenue(b)2019MarketRankingByRadioMarket(b)StationFormatTargetDemographicsWCVLCharlottesville,VAN/AN/AContemporaryCountryAdults25-54WCVQClarksville,TN−Hopkinsville,KYN/AN/AHotAdultContemporaryWomen25-44WVVRClarksville,TN−Hopkinsville,KYN/AN/AContemporaryCountryAdults25-54WZZPClarksville,TN−Hopkinsville,KYN/AN/ARockMen18-49WRNDClarksville,TN−Hopkinsville,KYN/AN/AClassicHitsAdults35-64WCVQ-HD2Clarksville,TN−Hopkinsville,KYN/AN/AContemporaryChristianAdults25-54WCVQ-HD3Clarksville,TN−Hopkinsville,KYN/AN/ACountryLegendsAdults45-64WHAIGreenfield,MAN/AN/AAdultContemporaryWomen25-54WPVQGreenfield,MAN/AN/AContemporaryCountryAdults25-54WLHHHiltonHead,SCN/AN/AClassicHitsAdults35-64WOEZHiltonHead,SCN/AN/ASoftAdultContemporaryWomen35-64WVSCHiltonHead,SCN/AN/AAdultVarietyHitsAdults35-64WVSC-HD2HiltonHead,SCN/AN/AOldiesAdults45-64WIIIIthaca,NYN/AN/AClassicRockAdults40-64WQNYIthaca,NYN/AN/AContemporaryCountryAdults25-54WQNY-HD3Ithaca,NYN/AN/AAlternativeRockMen18-34WYXLIthaca,NYN/AN/AAdultContemporaryWomen25-54WYXL-HD2Ithaca,NYN/AN/AAdultAlbumAlternativeAdults25-54WYXL-HD3Ithaca,NYN/AN/ASportsMen25-64WFIZIthaca,NYN/AN/AContemporaryHitsAdults18-34WFIZ-HD2Ithaca,NYN/AN/AClassicHitsAdults35-64KEGIJonesboro,ARN/AN/AClassicRockAdults40-64KDXYJonesboro,ARN/AN/AContemporaryCountryAdults25-54KJBXJonesboro,ARN/AN/AAdultContemporaryWomen25-54KJBX-HD2Jonesboro,ARN/AN/ACountryLegendsAdults45-64KDXY-HD2Jonesboro,ARN/AN/AContemporaryHitsAdults18-34KDXY-HD3Jonesboro,ARN/AN/ASportsESPNMen35-64WKNEKeene,NHN/AN/AHotAdultContemporaryWomen25-54WKNE-HD2Keene,NHN/AN/ASoftAdultContemporaryWomen25-54WKNE-HD3Keene,NHN/AN/AOldiesAdults45-64WSNIKeene,NHN/AN/AAdultContemporaryWomen25-44WSNI-HD2Keene,NHN/AN/AAdultAlbumAlternativeAdults25-54WINQKeene,NHN/AN/AContemporaryCountryAdults25-54WINQ-HD2Keene,NHN/AN/AClassicCountryAdults45-64KMITMitchell,SDN/AN/AContemporaryCountryAdults25-543StationMarket(a)2019MarketRankingByRadioRevenue(b)2019MarketRankingByRadioMarket(b)StationFormatTargetDemographicsKMIT-HD2Mitchell,SDN/AN/AAdultContemporaryWomen25-54KMIT-HD3Mitchell,SDN/AN/ASportsMen18-64KUQLMitchell,SDN/AN/AClassicHitsAdults40-64WRSINorthampton,MAN/AN/AAdultAlbumAlternativeAdults25-54WLZX-HD2Northampton,MAN/AN/AContemporaryHitsAdults18-34WLZX-HD3Northampton,MAN/AN/AOldiesAdults45-64KICDSpencer,IAN/AN/AContemporaryCountryAdults25-54KMRRSpencer,IAN/AN/AAdultContemporaryWomen25-54KMRR-HD2Spencer,IAN/AN/AOldiesAdults45-64KMRR-HD3Spencer,IAN/AN/ASoftAdultContemporaryFemale35-64WYMGSpringfield,ILN/AN/AClassicRockAdults40-64WDBRSpringfield,ILN/AN/AContemporaryHitsAdults18-34WQQLSpringfield,ILN/AN/AClassicHitsAdults35-64WLFZSpringfield,ILN/AN/AContemporaryCountryAdults25-54WDBR-HD2Springfield,ILN/AN/ACountryLegendsAdults45-64WDBR-HD3Springfield,ILN/AN/AOldiesAdults45-64AM:WJYIMilwaukee,WI3141ChristianAdults25-54WJOINorfolk,VA3945AdultStandardsAdults45-64KRNTDesMoines,IA6770SportsMen18-64KPSZDesMoines,IA6770ChristianAdults25-54WGANPortland,ME7199News/TalkAdults35-64WZANPortland,ME7199ClassicCountryAdults45-64WBAEPortland,ME7199SoftAdultContemporaryWomen35-64WGINPortland,ME7199SoftAdultContemporaryWomen35-64WSPOCharleston,SC8378GospelAdults25-54WLZXSpringfield,MA101100AlternativeRockMen18-49WFEAManchester,NH134199News/TalkAdults35-64WISEAsheville,NC154157Sports/TalkMen18-64WYSEAsheville,NC154157Sports/TalkMen18-64WSVAHarrisonburg,VA170248News/TalkAdults35-64WHBGHarrisonburg,VA170248SportsESPNMen18-64WNAXYankton,SD180255News/TalkAdults35-64KGMIBellingham,WAN/AN/ANews/TalkAdults35-64KPUGBellingham,WAN/AN/ASports/TalkMen18-64KBAIBellingham,WAN/AN/AClassicHitsAdults40-64WINQBrattleboro,VTN/AN/ANews/TalkAdults35-60WBCOBucyrus,OHN/AN/AClassicCountryAdults45-64WINACharlottesville,VAN/AN/ANews/TalkAdults35-64WVAXCharlottesville,VAN/AN/ASportsTalkMen18-644StationMarket(a)2019MarketRankingByRadioRevenue(b)2019MarketRankingByRadioMarket(b)StationFormatTargetDemographicsWOEZClarksville,TN−Hopkinsville,KYN/AN/ASoftAdultContemporaryWomen35-64WKFNClarksville,TN−Hopkinsville,KYN/AN/ASports/TalkESPNMen18-64WHMQGreenfield,MAN/AN/ANews/TalkAdults35-64WPVQGreenfield,MAN/AN/AClassicCountryAdults45-64WNYYIthaca,NYN/AN/AOldiesAdults45-64WHCUIthaca,NYN/AN/ANews/TalkAdults35-64WKBKKeene,NHN/AN/ANews/TalkAdults35-64WZBKKeene,NHN/AN/ASportsTalkMen18-64WHMPNorthampton,MAN/AN/ANews/TalkAdults35-64KICDSpencer,IAN/AN/ANews/TalkAdults35-64WTAXSpringfield,ILN/AN/ANews/TalkAdults35-64(a)Actualcityoflicensemaydifferfrommetropolitanmarketactuallyserved.(b)DerivedfromInvestinginRadio2019MarketReport.StrategyOurstrategyistooperatetopbillingradiostationsinmid-sizedmarkets,whichwedefineasmarketsrankedfrom20to200outofthemarketssummarizedbyInvestinginRadioMarketReport.Programmingandmarketingarekeycomponentsinourstrategytoachievetopratingsinourradiooperations.Inmanyofourmarkets,thethreeorfourmosthighlyratedradiostationsreceiveadisproportionatelyhighshareofthemarket’sadvertisingrevenues.Asaresult,astation’srevenueisdependentuponitsabilitytomaximizeitsnumberoflisteners/viewerswithinanadvertiser’sgivendemographicparameters.Incertaincasesweuseattributesotherthanspecificmarketlistenerdataforsalesactivities.Inthosemarketswheresufficientalternativedataisavailable,wedonotsubscribetoanindependentlistenerratingservice.Theradiostationsthatweownand/oroperateemployavarietyofprogrammingformats,includingClassicHits,AdultHits,Top40,Country,CountryLegends,Mainstream/Hot/SoftAdultContemporary,PureOldies,ClassicRock,andNews/Talk.Weregularlyperformextensivemarketresearch,includingmusicevaluations,focusgroupsandstrategicvulnerabilitystudies.Ourstationsalsoemployaudiencepromotionstofurtherdevelopandsecurealoyalfollowing.Thetelevisionstationsthatweownedand/oroperated,priortotheirsale,during2017,werecomprisedoftwoCBSaffiliates,oneABCaffiliate,twoFoxaffiliates,oneUnivisionaffiliate,oneNBCaffiliate,oneTelemundoaffiliateandoneCoziTVaffiliate.Inadditiontosecuringnetworkprogramming,wecarefullyselectedavailablesyndicatedprogrammingtomaximizeviewership.Wealsodevelopedlocalprogramming,includingastronglocalnewsfranchiseineachofourtelevisionmarkets.Weconcentrateonthedevelopmentofstrongdecentralizedlocalmanagement,whichisresponsiblefortheday-to-dayoperationsofthestationsweownand/oroperate.Wecompensatelocalmanagementbasedonthestation’sfinancialperformance,aswellasotherperformancefactorsthataredeemedtoaffectthelong-termabilityofthestationstoachievefinancialperformanceobjectives.Corporatemanagementisresponsibleforlong-rangeplanning,establishingpoliciesandprocedures,resourceallocationandmonitoringtheactivitiesofthestations.UndertheTelecommunicationsActof1996(the“TelecommunicationsAct”),wearepermittedtoownasmanyaseightradiostationsinasinglemarket.See“FederalRegulationofRadioandTelevision5Broadcasting”.Weseektoacquirereasonablypricedbroadcastpropertieswithsignificantgrowthpotentialthatarelocatedinmarketswithwell-establishedandrelativelystableeconomies.Weoftenfocusonlocaleconomiessupportedbyastrongpresenceofstateorfederalgovernmentoroneormoremajoruniversities.Futureacquisitionswillbesubjecttotheavailabilityoffinancing,thetermsofourcreditfacility,andcompliancewiththeCommunicationsActof1934(the“CommunicationsAct”)andFederalCommunicationsCommission(“FCC”)rules.AdvertisingSalesOurprimarysourceofrevenueisfromthesaleofadvertisingforbroadcastonourstations.Dependingontheformatofaparticularradiostation,thereareapredeterminednumberofadvertisementsbroadcasteachhour.Thenumberofadvertisementsbroadcastonourtelevisionstationswerelimitedbycertainnetworkaffiliationandsyndicationagreementsand,withrespecttochildren’sprograms,federalregulation.Wedeterminethenumberofadvertisementsbroadcasthourlythatcanmaximizeastation’savailablerevenuedollarswithoutjeopardizinglistening/viewinglevels.Whiletheremaybeshiftsfromtimetotimeinthenumberofadvertisementsbroadcastduringaparticulartimeoftheday,thetotalnumberofadvertisementsbroadcastonaparticularstationgenerallydoesnotvarysignificantlyfromyeartoyear.Anychangeinourrevenue,withtheexceptionofthoseinstanceswherestationsareacquiredorsold,isgenerallytheresultofpricingadjustments,whicharemadetoensurethatthestationefficientlyutilizesavailableinventory.Advertisingrateschargedbyradioandtelevisionstationsarebasedprimarilyonastation’sabilitytoattractaudiencesinthedemographicgroupstargetedbyadvertisers,thenumberofstationsinthemarketcompetingforthesamedemographicgroup,thesupplyofanddemandforradioandtelevisionadvertisingtime,andotherqualitativefactorsincludingrateschargedbycompetingradioandtelevisionstationswithinagivenmarket.Radioratesaregenerallyhighestduringmorningandafternoondrive-timehours,whiletelevisionadvertisingratesaregenerallyhigherduringprimetimeeveningviewingperiods.Mostadvertisingcontractsareshort-term,generallyrunningforonlyafewweeks.Thisallowsbroadcasterstheabilitytomodifyadvertisingratesasdictatedbychangesinstationownershipwithinamarket,changesinlistener/viewerratingsandchangesinthebusinessclimatewithinaparticularmarket.Approximately$116,474,000or88%ofourgrossrevenuefortheyearendedDecember31,2019(approximately$116,386,000or87%infiscal2018andapproximately$124,809,000or87%infiscal2017)wasgeneratedfromthesaleoflocaladvertisingforbothcontinuingoperationsanddiscontinuedoperations.Additionalrevenueisgeneratedfromthesaleofnationaladvertising,networkcompensationpayments,barterandothermiscellaneoustransactions.Inallofourmarkets,weattempttomaintainalocalsalesforcethatisgenerallylargerthanourcompetitors.Theprincipalgoalinoursaleseffortsistodeveloplong-standingcustomerrelationshipsthroughfrequentdirectcontacts,whichwebelieverepresentsacompetitiveadvantage.Wealsotypicallyprovideincentivestooursalesstafftoseekoutnewopportunitiesresultingintheestablishmentofnewclientrelationships,aswellasnewsourcesofrevenue,notdirectlyassociatedwiththesaleofbroadcasttime.Eachofourstationsalsoengagesindependentnationalsalesrepresentativestoassistusinobtainingnationaladvertisingrevenues.Theserepresentativesobtainadvertisingthroughnationaladvertisingagenciesandreceiveacommissionfromusbasedonournetrevenuefromtheadvertisingobtained.Totalgrossrevenueresultingfromnationaladvertisingforbothcontinuingoperationsanddiscontinuedoperationsinfiscal2019wasapproximately$15,914,000or12%ofourgrossrevenue(approximately$18,110,000or13%infiscal2018andapproximately$18,151,000or13%infiscal2017).CompetitionBothradioandtelevisionbroadcastingarehighlycompetitivebusinesses.Ourstationscompeteforlisteners/viewersandadvertisingrevenuesdirectlywithotherradioand/ortelevisionstations,aswellasothermedia,withintheirmarkets.Ourradiostations(andpriortotheirsale,ourtelevisionstations)competeforlisteners/viewersprimarilyonthebasisofprogramcontentandbyemployingon-airtalentwhichappealstoaparticulardemographicgroup.Bybuildingastronglistener/viewerbasecomprisedofaspecificdemographicgroupineachofourmarkets,weareabletoattractadvertisersseekingtoreachtheselisteners/viewers.6Othermedia,includingbroadcasttelevisionand/orradio(asapplicable),cabletelevision,newspapers,magazines,directmail,theInternet,couponsandbillboardadvertising,alsocompetewithusforadvertisingrevenues.Theradioandtelevisionbroadcastingindustriesarealsosubjecttocompetitionfromnewmediatechnologies,suchasthedeliveryofaudioprogrammingbycableandsatellitetelevisionsystems,satelliteradiosystems,directreceptionfromsatellites,andstreamingofaudioontheInternet.SeasonalityOurrevenuevariesthroughouttheyear.Advertisingexpenditures,ourprimarysourceofrevenue,isgenerallylowestinthefirstquarter.EnvironmentalComplianceAstheowner,lesseeoroperatorofvariousrealpropertiesandfacilities,wearesubjecttovariousfederal,stateandlocalenvironmentallawsandregulations.Historically,compliancewiththeselawsandregulationshasnothadamaterialadverseeffectonourbusiness.Therecanbenoassurance,however,thatcompliancewithexistingornewenvironmentallawsandregulationswillnotrequireustomakesignificantexpendituresoffunds.EmployeesAsofDecember31,2019,wehadapproximately663full-timeemployeesand339part-timeemployees,noneofwhomarerepresentedbyunions.Webelievethatourrelationswithouremployeesaregood.Weemployseveralhigh-profilepersonalitieswithlargeloyalaudiencesintheirrespectivemarkets.Wehaveenteredintoemploymentandnon-competitionagreementswithourPresidentandwithmostofouron-airpersonalities,aswellasnon-competitionagreementswithourcommissionedsalesrepresentatives.AvailableInformationYoucanfindmoreinformationaboutusatourInternetwebsitewww.sagacommunications.com.OurAnnualReportonForm10-K,ourQuarterlyReportsonForm10-Q,ourCurrentReportsonForm8-KandanyamendmentstothosereportsareavailablefreeofchargeonourInternetwebsiteassoonasreasonablypracticableafterweelectronicallyfilesuchmaterialwith,orfurnishitto,theSecuritiesandExchangeCommission(the“SEC”).FederalRegulationofRadioBroadcastingIntroduction.Theownership,operationandsaleofradiostations,includingthoselicensedtous,aresubjecttothejurisdictionoftheFCC,whichactsunderauthoritygrantedbytheCommunicationsAct.Amongotherthings,theFCCassignsfrequencybandsforbroadcasting;determinestheparticularfrequencies,locationsandoperatingpowerofstations;issues,renews,revokesandmodifiesstationlicenses;determineswhethertoapprovechangesinownershiporcontrolofstationlicenses;regulatesequipmentusedbystations;adoptsandimplementsregulationsandpoliciesthatdirectlyorindirectlyaffecttheownership,operationandemploymentpracticesofstations;andhasthepowertoimposepenaltiesforviolationsofitsrulesortheCommunicationsAct.ForadditionalinformationontheimpactofFCCregulationsandtheintroductionofnewtechnologiesonouroperations,see“ForwardLookingStatements”and“RiskFactors”containedelsewhereherein.ThefollowingisabriefsummaryofcertainprovisionsoftheCommunicationsActandofspecificFCCregulationsandpolicies.ReferenceshouldbemadetotheCommunicationsAct,FCCrulesandthepublicnoticesandrulingsoftheFCCforfurtherinformationconcerningthenatureandextentoffederalregulationofbroadcaststations.LicenseRenewal.Radiobroadcastinglicensesaregrantedformaximumtermsofeightyears,andaresubjecttorenewaluponapplicationtotheFCC.Underits“two-step”renewalprocess,theFCCmustgrant7arenewalapplicationifitfindsthatduringtheprecedingtermthelicenseehasservedthepublicinterest,convenienceandnecessity,andtherehavebeennoseriousviolationsoftheCommunicationsActortheFCC’sruleswhich,takentogether,wouldconstituteapatternofabuse.Ifarenewalapplicantfailstomeetthesestandards,theFCCmayeitherdenyitsapplicationorgranttheapplicationonsuchtermsandconditionsasareappropriate,includingrenewalforlessthanthefull8-yearterm.Inmakingthedeterminationofwhethertorenewthelicense,theFCCmaynotconsiderwhetherthepublicinterestwouldbeservedbythegrantofalicensetoapersonotherthantherenewalapplicant.IftheFCC,afternoticeandopportunityforahearing,findsthatthelicenseehasfailedtomeettherequirementsforrenewalandnomitigatingfactorsjustifytheimpositionoflessersanctions,theFCCmayissueanorderdenyingtherenewalapplication,andonlythereaftermaytheFCCacceptapplicationsforaconstructionpermitspecifyingthebroadcastingfacilitiesoftheformerlicensee.Petitionsmaybefiledtodenytherenewalapplicationsofourstations,butanysuchpetitionsmustraiseissuesthatwouldcausetheFCCtodenyarenewalapplicationunderthestandardsadoptedinthe“two-step”renewalprocess.AlltheCompany’slicenseshavebeenrenewedfortheirregularterms.Inthefuture,weintendtotimelyfilerenewalapplications,asrequiredfortheCompany’sstations.Radiostationlicensesgenerallyexpirealongwiththelicensesofallotherradiostationsinagivenstate.TheFCCacceptsrenewalapplicationsforvariousgroupsofradiostationseverytwomonths,thecurrentcyclehavingbeguninJune2019.WehavefiledapplicationsforrenewaloflicenseofourradiostationsinVirginia,NorthCarolina,SouthCarolinaandFlorida,whichapplicationshavebeenroutinelygranted.ApplicationsforrenewaloflicenseofourradiostationsinArkansasarepending.InJanuary2018,theFCCdesignatedtherenewalapplicationsoftwoAMradiostationsforhearingbasedonthestations’recordsofextendedperiodsofsilenceduringandfollowingtheirrespectivelicenserenewalterms.UndertheCommunicationsAct,ifabroadcaststationfailstotransmitsignalsforanyconsecutive12-monthperiod,theFCClicenseexpiresattheendofthatperiod,unlesstheFCCexercisesitsdiscretiontoextendorreinstatethelicense“topromoteequityandfairness.”TheFCC,todate,hasrarelyexercisedsuchdiscretion.Further,theFCChasrecentlyrevokedthelicensesofbroadcaststationsthatfailedtopayregulatoryfees.TheCompanyiscurrentinthepaymentofregulatoryfeestotheFCC.Thefollowingtablesetsforththemarketandbroadcastpowerofeachofthebroadcaststationsthatweownoroperatewithanattributableinterestandthedateonwhicheachsuchstation’sFCClicenseexpires:StationMarket(1)Power(Watts)(2)ExpirationDateofFCCAuthorizationFM:WOXLAsheville,NC50,000December1,2027WTMTAsheville,NC50,000December1,2027KISMBellingham,WA100,000February1,2022KAFEBellingham,WA100,000February1,2022WRSYBrattleboro,VT3,000April1,2022WKVTBrattleboro,VT6,000April1,2022WQELBucyrus,OH3,000October1,2020WLRWChampaign,IL50,000December1,2020WIXYChampaign,IL25,000December1,2020WREEChampaign,IL25,000December1,2020WYXYChampaign,IL50,000December1,2020WAVFCharleston,SC100,000December1,2027WCKNCharleston,SC100,000December1,2027WMXZCharleston,SC50,000December1,2027WXSTCharleston,SC100,000December1,2027WWWVCharlottesville,VA50,000October1,2027WQMZCharlottesville,VA6,000October1,2027WCNRCharlottesville,VA6,000October1,20278StationMarket(1)Power(Watts)(2)ExpirationDateofFCCAuthorizationWCVLCharlottesville,VA6,000October1,2027WCVQClarksville,TN/Hopkinsville,KY100,000August1,2020WZZPClarksville,TN/Hopkinsville,KY6,000August1,2020WVVRClarksville,TN/Hopkinsville,KY100,000August1,2020WRNDClarksville,TN/Hopkinsville,KY6,000August1,2020WSNYColumbus,OH50,000October1,2020WNNPColumbus,OH6,000October1,2020WNNDColumbus,OH6,000October1,2020WVMXColumbus,OH6,000October1,2020WLVQColumbus,OH50,000October1,2020KSTZDesMoines,IA100,000February1,2021KIOADesMoines,IA100,000February1,2021KAZRDesMoines,IA100,000February1,2021KOEZDesMoines,IA100,000February1,2021WHAIGreenfield,MA3,000April1,2022WPVQGreenfield,MA3,000April1,2022WMQRHarrisonburg,VA25,000October1,2027WQPOHarrisonburg,VA50,000October1,2027WSIGHarrisonburg,VA25,000October1,2027WWREHarrisonburg,VA6,000October1,2027WOEZHiltonHeadIsland,SC25,000December1,2027WLHHHiltonHeadIsland,SC25,000December1,2027WVSCHiltonHeadIsland,SC25,000December1,2027WYXLIthaca,NY50,000June1,2022WQNYIthaca,NY50,000June1,2022WIIIIthaca,NY50,000June1,2022WFIZIthaca,NY6,000June1,2022KEGIJonesboro,AR50,000June1,2020(4)KDXYJonesboro,AR25,000June1,2020(4)KJBXJonesboro,AR25,000June1,2020(4)WKNEKeene,NH50,000April1,2022WSNIKeene,NH6,000April1,2022WINQKeene,NH6,000April1,2022WZIDManchester,NH50,000April1,2022WMLLManchester,NH6,000April1,2022WKLHMilwaukee,WI50,000December1,2020WHQGMilwaukee,WI50,000December1,2020WNRGMilwaukee,WI6,000December1,2020WJMRMilwaukee,WI6,000December1,2020KMITMitchell,SD100,000April1,2021KUQLMitchell,SD100,000April1,2021WNORNorfolk,VA50,000October1,20279StationMarket(1)Power(Watts)(2)ExpirationDateofFCCAuthorizationWAFXNorfolk,VA100,000October1,2027WOGKOcala,FL100,000February1,2028WYNDOcala,FL6,000February1,2028WNDDOcala,FL6,000February1,2028WNDNOcala,FL6,000February1,2028WRSINorthampton,MA3,000April1,2022WPORPortland,ME50,000April1,2022WCLZPortland,ME50,000April1,2022WMGXPortland,ME50,000April1,2022WYNZPortland,ME25,000April1,2022KICDSpencer,IA100,000February1,2021KMRRSpencer,IA25,000February1,2021WLZXSpringfield,MA6,000April1,2022WAQYSpringfield,MA50,000April1,2022WYMGSpringfield,IL50,000December1,2020WLFZSpringfield,IL50,000December1,2020WDBRSpringfield,IL50,000December1,2020WQQLSpringfield,IL25,000December1,2020WNAXYankton,SD100,000April1,2021AM:WISEAsheville,NC5,000December1,2027WYSEAsheville,NC5,000(3)December1,2027KGMIBellingham,WA5,000February1,2022KPUGBellingham,WA10,000February1,2022KBAIBellingham,WA1,000February1,2022WINQBrattleboro,VT1,000April1,2022WBCOBucyrus,OH500(3)October1,2020WSPOCharleston,SC5,000December1,2027WINACharlottesville,VA5,000October1,2027WVAXCharlottesville,VA1,000October1,2027WQEZClarksville,TN/Hopkinsville,KY1,000(3)August1,2020WKFNClarksville,TN4,000(3)August1,2020KRNTDesMoines,IA5,000February1,2021KPSZDesMoines,IA10,000February1,2021WHMQGreenfield,MA1,000April1,2022WPVQGreenfield,MA2,500(3)April1,2022WSVAHarrisonburg,VA5,000October1,2027WHBGHarrisonburg,VA1,000(3)October1,2027WHCUIthaca,NY5,000June1,2022WNYYIthaca,NY5,000June1,2022WKBKKeene,NH5,000April1,2022WZBKKeene,NH1,000April1,202210StationMarket(1)Power(Watts)(2)ExpirationDateofFCCAuthorizationWFEAManchester,NH5,000April1,2022WJYIMilwaukee,WI1,000December1,2020WJOINorfolk,VA1,000October1,2027WHMPNorthampton,MA1,000April1,2022WGANPortland,ME5,000April1,2022WZANPortland,ME5,000April1,2022WBAEPortland,ME1,000April1,2022WGINPortland,ME1,000April1,2022KICDSpencer,IA1,000February1,2021WLZXSpringfield,MA2,500(3)April1,2022WTAXSpringfield,IL1,000December1,2020WNAXYankton,SD5,000April1,2021(1)Somestationsarelicensedtoadifferentcommunitylocatedwithinthemarketthattheyserve.(2)Somestationsarelicensedtooperatewithacombinationofeffectiveradiatedpower(“ERP”)andantennaheight,whichmaybedifferentfrom,butprovideequivalentcoverageto,thepowershown.WHBG,WYSE,WISE,KPSZ,KPUG,KGMI,KBAI,WZBK,WBCO,WQEZ,WKFN,WPVQ(AM),WNYY,WHCU,WINQ(AM),WSVAandWLZX(AM)operatewithlowerpoweratnightthanthepowershown.(3)Operatesdaytimeonlyorwithgreatlyreducedpoweratnight.(4)Anapplicationforrenewaloflicensewastimelyfiledandispending.OwnershipMatters.TheCommunicationsActprohibitstheassignmentofabroadcastlicenseorthetransferofcontrolofabroadcastlicenseewithoutthepriorapprovaloftheFCC.Indeterminingwhethertograntorrenewabroadcastlicense,theFCCconsidersanumberoffactorspertainingtothelicensee,includingcompliancewiththeCommunicationsAct’slimitationsonalienownership;compliancewithvariousruleslimitingcommonownershipofbroadcast,cableandnewspaperproperties;andthe“character”andotherqualificationsofthelicenseeandthosepersonsholding“attributableorcognizable”intereststherein.UndertheCommunicationsAct(Section310(b)),broadcastlicensesmaynotbegrantedtoanycorporationhavingmorethanone-fifthofitsissuedandoutstandingcapitalstockownedorvotedbyaliens(includingnon-U.S.corporations),foreigngovernmentsortheirrepresentatives(collectively,“Aliens”).TheCommunicationsActalsoprohibitsacorporation,withoutFCCwaiver,fromholdingabroadcastlicenseifthatcorporationiscontrolled,directlyorindirectly,byanothercorporationinwhichmorethan25%oftheissuedandoutstandingcapitalstockisownedorvotedbyAliens.TheFCChasissuedinterpretationsofexistinglawunderwhichtheserestrictionsinmodifiedformapplytootherformsofbusinessorganizations,includingpartnerships.Weserveasaholdingcompanyforourvariousradiostationsubsidiaries(wherewecouldnothavemorethan25%ofourstockownedorvotedbyAliens).TheFCChasadoptedrulestoextendtobroadcastlicenseesthesamerulesandproceduresthatcommoncarrierwirelesslicenseesusetoseekapprovalforforeignownership,withbroadcast-specificmodifications.TherevisedrulesandproceduresallowabroadcastlicenseetorequestinapetitionfordeclaratoryrulingunderTitle47U.S.C.Section310(b)(4):(1)approvalofuptoandincluding100percentaggregateforeignownershipofitscontrollingU.S.parent;11(2)approvalforaproposed,controllingforeigninvestortoincreaseitsequityand/orvotinginterestsintheU.S.parentuptoandincluding100percentatsomefuturetimewithoutfilinganewpetition—thisapplieswheretheforeigninvestorwouldacquireaninitialcontrollinginterestoflessthan100percent;and(3)approvalforanon-controllingforeigninvestornamedinthepetitiontoincreaseitsequityand/orvotinginterestsintheU.S.parentatsomefuturetime,uptoandincludinganon-controlling49.99percentequityand/orvotinginterest.TherevisedruleswouldrequiretheCompanytoseekspecificapprovalonlyofforeignindividualsorentitieswithagreaterthan5percentownershipinterest(or,incertainsituations,aninterestgreaterthan10percent).Therevisedrulesallowbroadcastlicenseesthathaveforeignownershiprulingstoapplythoserulingstoallradioandtelevisionbroadcastlicensesthenheldorsubsequentlyproposedtobeacquiredbythesamelicenseeanditscoveredsubsidiariesandaffiliates,regardlessofthebroadcastservice(e.g.,AM,FM,orTV)orthegeographicareainwhichthestationsarelocated.TherevisedmethodologyprovidesaframeworkforapubliclytradedlicenseeorcontrollingU.S.parenttoascertainitsforeignownershipusinginformationthatis“knownorreasonablyshouldbeknown”tothecompanyintheordinarycourseofbusiness.ForpubliclytradedlicenseesandU.S.parentcompanies(liketheCompany),therevisedrulesformalizethecurrentequitablepracticeofrecognizingalicensee’sgoodfaitheffortstocomplywithSection310(b)wherethenon-compliancewasduesolelytocircumstancesbeyondthelicensee’scontrolthatwerenotknownorreasonablyforeseeabletothelicensee.Wearepermittedtoownanunlimitednumberofradiostationsonanationwidebasis(subjecttothelocalownershiprestrictionsdescribedbelow).Undertherules,thenumberofradiostationsonepartymayowninalocalNielsenAudio-ratedradiomarketisdeterminedbythenumberoffull-powercommercialandnoncommercialradiostationsinthemarketasdeterminedbyNielsenAudioandBIA/Kelsey.RadiomarketsthatarenotNielsenAudioratedaredeterminedbyanalysisofthebroadcastcoveragecontoursoftheradiostationsinvolved.UndertheCommunicationsAct,andtheFCC’s“LocalOwnershipRule,”wearepermittedtoownradiostations(withoutregardtotheaudiencesharesofthestations)baseduponthenumberoffull-powerradiostationsintherelevantradiomarketasfollows:NumberofStationsInRadioMarketNumberofStationsWeCanOwn14orFewerTotalof5stations,notmorethan3inthesameservice(AMorFM),excepttheCompanycannotownmorethan50%ofthestationsinthemarket.15-29Totalof6stations,notmorethan4inthesameservice(AMorFM).30-44Totalof7stations,notmorethan4inthesameservice(AMorFM).45orMoreTotalof8stations,notmorethan5inthesameservice(AMorFM).InadecisionoftheUnitedStatesCourtofAppealsfortheThirdCircuitinPrometheusRadioProjectv.FCC,939F.3d567(3dCir.2019)(“Prometheus”),thecourtvacatedandremandedtheCommission’s2010/2014QuadrennialReviewOrderonReconsideration,32FCCRcd9802(2017),whichhadmodifiedtheCommission’smediaownershiprulesby:(1)eliminatingthenewspaper/broadcastcross-ownershipandradio/televisioncross-ownershiprules;(2)revisingthelocaltelevisionownershiprulebyeliminatingthe“eightvoices”testandpermittingapplicantstoseekthecombinationoftwotop-fourrankedstationsinagivenmarketonacase-by-casebasis;and(3)deemingjointsalesagreementsbetweentelevisionstationstobenon-attributable.ByvacatingtheOrderonReconsideration,thePrometheusdecisionabrogatedtheserulechangesandreinstatedthepriormediaownershiprulesadoptedinthe2010/2014QuadrennialReviewOrder,31FCCRcd9864(2016).ThecourtalsovacatedtheCommission’sdefinitionofan“eligibleentity,”whichhadbeenadoptedinthe2010/2014QuadrennialReviewOrder.Thereinstated12rules(1)prohibitthecommonownershipofadailyprintnewspaperandafull-powerbroadcaststation(AM,FMorTV)ifthestation’sservicecontourencompassesthenewspaper’scommunityofpublication);(2)prohibitanentityfromowningtwoormoretelevisionstationsandoneradiostationinthesamemarket,unlessthemarketmetcertainsizecriteria;(3)reinstitutedtheso-called“Eight-VoicesTest”andthe“Top-FourProhibition”;(4)disposedofapresumptionforcertainembeddedmarkets(smallermarkets,asdefinedbyNielsenAudio,thatareincludedinalargerparentmarket)transactions;and(5)reinstatedtheattributionrulefortelevisionjointsalesagreements.Thedisclosurerequirementforsharedserviceagreementsinvolvingcommercialtelevisionstationswasunchanged.TheCourtdecisionvacatedaproposed“incubator”programtopromoteownershipdiversity.InDecember2018,theFCCadoptedanNPRMtoinitiatethe2018QuadrennialReviewofitsmediaownershiprules.ThethreerulessubjecttoreviewaretheLocalRadioOwnershipRule,theLocalTelevisionOwnershipRule,andthedualnetworkrule(whichpermitsatelevisionstationtoaffiliatewithanentitymaintainingtwoormorebroadcasttelevisionnetworksunlessthetwoormorenetworksconsistoftwoormoreofthemajornetworks(i.e.,ABC,CBS,NBCandFox)oroneofthesefournetworksandeithertheUPNorWBtelevisionnetwork.)TheFCCisseekingcommentonwhether,giventhecurrentstateofthemediamarketplace,theFCCshouldretain,modify,oreliminateanyoftheserules.WhetherPrometheuswillaffectthisNPRM,interalia,TheCompanycannotpredictwhat,ifanyaction,theFCCmaytakeasaresultofitsreview.NewrulestobepromulgatedundertheCommunicationsActmaypermitustoown,operate,controlorhaveacognizableinterestinadditionalradiobroadcaststationsiftheFCCdeterminesthatsuchownership,operation,controlorcognizableinterestwillresultinanincreaseinthenumberofradiostationsinoperation.Nofirmdatehasbeenestablishedforinitiationofthisrule-makingproceeding.NewrulescouldrestricttheCompany’sabilitytoacquireadditionalradioandtelevisionstationsinsomemarkets.TheCourtandFCCproceedingsareongoingandwecannotpredictwhataction,ifany,theCourtortheFCCmaytaketofurthermodifyitsrules.Duetochangesinlocalradiomarkets,theownershipofsomeofourradiostations,inthefuture,couldexceedthecurrentownershiplimitsimposedbytheLocalOwnershipRule.Theircurrentownershipstructureis“grandfathered”bytheFCC.Absentawaiver,itmightnotbepossibletosellallofthemascurrentlyconfiguredin“clusters”toasinglepurchaser.ThestatementshereinarebasedsolelyontheFCC’smultipleownershiprulesineffectasofthedatehereofanddonotincludeanyforward-lookingstatementsconcerningcompliancewithanyfuturemultipleownershiprules.TheFCCgenerallyappliesitsownershiplimitsto“attributable”interestsheldbyanindividual,corporation,partnershiporotherassociation.Inthecaseofcorporationsholdingbroadcastlicenses,theinterestsofofficers,directorsandthosewho,directlyorindirectly,havetherighttovote5%ormoreofthecorporation’sstock(or20%ormoreofsuchstockinthecaseofcertainpassiveinvestorsthatareholdingstockforinvestmentpurposesonly)aregenerallyattributable,asarepositionsofanofficerordirectorofacorporateparentofabroadcastlicensee.Currently,oneofourdirectorshasanattributableinterestorinterestsincompaniesapplyingfororlicensedtooperatebroadcaststationsotherthanus.TheFCC’sownershipattributionrules(a)applytolimitedliabilitycompaniesandregisteredlimitedliabilitypartnershipsthesameattributionrulesthattheFCCappliestolimitedpartnerships;and(b)includeanequity/debtplus(“EDP”)rulethatattributestheothermediainterestsofanotherwisepassiveinvestoriftheinvestoris(1)a“major-marketprogramsupplier”thatsuppliesover15%ofastation’stotalweeklybroadcastprogramminghours,or(2)asame-marketmediaentitysubjecttotheFCC’smultipleownershiprules(includingbroadcasters,cableoperatorsandnewspapers)sothatitsinterestinalicenseeorothermediaentityinthatmarketwillbeattributedifthatinterest,aggregatingbothdebtandequityholdings,exceeds33%ofthetotalassetvalue(equityplusdebt)ofthelicenseeormediaentity.WecouldbeprohibitedfromacquiringafinancialinterestinstationsinmarketswhereapplicationoftheEDPrulewouldresultinushavinganattributableinterestinthestations.Inreconsideringitsrules,theFCCalsoeliminatedthe“singlemajorityshareholderexemption”whichprovidesthatminorityvotingsharesinacorporationwhereoneshareholdercontrolsamajorityofthevotingstockarenotattributable;however,theFCC“suspended”theeliminationofthisexemptionuntiltheFCCresolvedissuesconcerningcabletelevisionownership.InadditiontotheFCC’smultipleownershiprules,theAntitrustDivisionoftheUnitedStatesDepartmentofJusticeandtheFederalTradeCommissionandsomestategovernmentshavetheauthoritytoexamineproposedtransactionsforcompliancewithantitruststatutesandguidelines.TheAntitrustDivisionhasissued“civilinvestigativedemands”andobtainedconsentdecreesrequiringthedivestitureofstationsinaparticularmarketbasedonantitrustconcerns.13ProgrammingandOperation.TheCommunicationsActrequiresbroadcasterstoservethe“publicinterest.”Licenseesarerequiredtopresentprogrammingthatisresponsivetocommunityproblems,needsandinterestsandtomaintaincertainrecordsdemonstratingsuchresponsiveness.Complaintsfromlistenersconcerningastation’sprogrammingoftenwillbeconsideredbytheFCCwhenitevaluatesrenewalapplicationsofalicensee,althoughsuchcomplaintsmaybefiledatanytimeandgenerallymaybeconsideredbytheFCCatanytime.StationsalsomustfollowvariousrulespromulgatedundertheCommunicationsActthatregulate,amongotherthings,politicaladvertising,sponsorshipidentification,theadvertisementofcontestsandlotteries,obsceneandindecentbroadcasts,andtechnicaloperations,includinglimitsonradiofrequencyradiation.TheFCCnowrequirestheownersofantennasupportingstructures(towers)toregisterthemwiththeFCC.Asanownerofsuchtowers,oursubsidiariesaresubjecttotheregistrationrequirements.OnJanuary13,2020,theFCCreleasedanOrderconfirmingaConsentDecreewherebytheownerofseveralantennastructuresagreedtopaythegovernmentacivilpenaltyof$1,130,000anddevelopaCompliancePlanrequiringreportsfortwoyearsasaresultof(1)failingtoconductrequireddailyinspectionsofthelightingsystemsat10tower,(2)failingtocompletelyloglightingfailuresat7towers,and(3)failingtotimelynotifytheFCCofitsacquisitionof2towers.In2017,theFCCeliminatedthebroadcastmainstudiorule.TheFCCretainedtherequirementthatstationsmaintainalocalortoll-freetelephonenumbertoensureconsumershavereadyaccesstotheirlocalstations.TheFCC’srulesrequirecableoperators,directsatelliteTVproviders,broadcastradiolicensees,andsatelliteradiolicenseestopostpublicinspectionfilestotheFCC’sonlinedatabaseratherthanmaintainingtheminalocalpublicinspectionfile.TheCompany’sradiostationsposttheirpublicinspectionfilestotheFCC’swebsite.PostingthesefilestotheFCC’sonlinedatabaserendersthematerialsmorewidelyaccessibletothepublic.TheFCChaswarnedlicenseesofpossibleenforcementactionifthesefilesarefoundnottobeincomplianceatthetimeoflicenserenewal.TheCompanyisrequiredtopay(1)FCCfilingfeesinconnectionwithitsapplicationsandan(2)annualregulatoryfeedeterminedbythenumberandcharacteroftheradiostationstheCompanyownsasofOctober1ofeachprioryear.EqualEmploymentOpportunityRules.Equalemploymentopportunity(EEO)rulesandpoliciesforbroadcastersprohibitdiscriminationbybroadcastersandmultichannelvideoprogrammingdistributors.Theyalsorequirebroadcasterstoprovidenoticeofjobvacanciesandtoundertakeadditionaloutreachmeasures,suchasjobfairsandscholarshipprograms.Therulesmandatea“threeprong”outreachprogram;i.e.,Prong1:widelydisseminateinformationconcerningeachfull-time(30hoursormore)jobvacancy,exceptforvacanciesfilledinexigentcircumstances;Prong2:providenoticeofeachfull-timejobvacancytorecruitmentorganizationsthathaverequestedsuchnotice;andProng3:completetwo(forbroadcastemploymentunitswithfivetotenfull-timeemployeesorthatarelocatedinsmallermarkets)orfour(foremploymentunitswithmorethantenfull-timeemployeeslocatedinlargermarkets)longer-termrecruitmentinitiativeswithinatwo-yearperiod.Theseinclude,forexample,jobfairs,scholarshipandinternshipprograms,andothercommunityeventsdesignedtoinformthepublicastoemploymentopportunitiesinbroadcasting.Therulesmandateextensiverecordkeepingandreportingrequirements.In2017,theFCCissuedaDeclaratoryRulingpermittingbroadcaststationstousetheinternetforjobpostingsasthirdsolemeansofrecruitingemployees(solongasthepostingsreachallsegmentsofthestation’scommunity.TheEEOrulesareenforcedthroughreviewatrenewaltime,andthroughrandomauditsandtargetedinvestigationsresultingfrominformationreceivedastopossibleviolations.TheFCChasnotyetdecidedonwhetherandhowtoapplytheEEOruletopart-timepositions.Failuretoobservetheseorotherrulesandpoliciescanresultintheimpositionofvarioussanctions,includingmonetaryforfeitures,thegrantof“short”(lessthanthefulleight-year)renewaltermsor,forparticularlyegregiousviolations,thedenialofalicenserenewalapplicationortherevocationofalicense.InanNPRMreleasedJune21,2019(MBDocketNo.19-177),theFCCisreviewingtheEEOrules.IntheNPRM,theFCCseekscommentonitstrackrecordonEEOenforcement,whethertheagencyshouldmakeimprovementstoEEOcomplianceandenforcement,andinvitescommentonitsauditprogram.TheCompanycannotpredictwhether,orifchangesmaybemadeasaresultofthisNPRM.TimeBrokerageAgreements.Asiscommonintheindustry,wehavepreviouslyenteredintowhathavecommonlybeenreferredtoasTimeBrokerageAgreements(“TBAs”)whicharesometimestermed“LocalMarketingAgreements.”Sucharrangementsareanextensionoftheconceptofagreementsunder14whichalicenseeofastationsellsblocksoftimeonitsstationtoanentityorentitieswhichpurchasetheblocksoftimeandwhichselltheirowncommercialadvertisingannouncementsduringthetimeperiodsinquestion.Whiletheseagreementsmaytakevaryingforms,underatypicalTBA,separatelyownedandlicensedradioortelevisionstationsagreetoenterintocooperativearrangementsofvaryingsorts,subjecttocompliancewiththerequirementsofantitrustlawsandwiththeFCC’srulesandpolicies.Underthesetypesofarrangements,separately-ownedstationsagreetofunctioncooperativelyintermsofprogramming,advertisingsales,andothermatters,subjecttothelicenseeofeachstationmaintainingindependentcontroloverthefinancing,programmingandstationoperationsofitsownstation.OnetypicaltypeofTBAisaprogrammingagreementbetweentwoseparately-ownedradioortelevisionstationsservingacommonservicearea,wherebythelicenseeofonestationpurchasessubstantialportionsofthebroadcastdayontheotherlicensee’sstation,subjecttoultimateeditorialandothercontrolsbeingexercisedbythelatterlicensee,andsellsadvertisingtimeduringsuchprogramsegments.TheFCC’srulesprovidethatastationpurchasing(brokering)timeonanotherstationservingthesamemarketwillbeconsideredtohaveanattributableownershipinterestinthebrokeredstationforpurposesoftheFCC’smultipleownershiprules.Asaresult,undertherules,abroadcaststationwillnotbepermittedtoenterintoatimebrokerageagreementgivingittherighttopurchasemorethan15%ofthebroadcasttime,onaweeklybasis,ofanotherlocalstationthatitcouldnotownunderthelocalownershiprulesoftheFCC’smultipleownershiprules.TheFCC’srulesalsoprohibitabroadcastlicenseefromsimulcastingmorethan25%ofitsprogrammingonanotherstationinthesamebroadcastservice(i.e.,AM-AMorFM-FM)whetheritownsthestationsorthroughaTBAarrangement,wherethebrokeredandbrokeringstationsservesubstantiallythesamegeographicarea.TheCompanycurrentlyhasnoTBAs.InanNPRMreleasedNovember25,2019(MBDocketNos.17-105and19-310),theFCCisseekingcommentonwhethertomodifyoreliminatetheradiosimulcastingrule.OtherFCCRequirements.LowPowerFMRadioand“FrankenFM”Stations.Thereexistsa“lowpowerradioservice”ontheFMband(“LPFM”)inwhichtheFCCauthorizestheconstructionandoperationofnoncommercialeducationalFMstationswithupto100wattsERPwithantennaheightaboveaverageterrain(“HAAT”)atupto30meters(100feet).Thiscombinationiscalculatedtoproduceaservicearearadiusofapproximately3.5miles.TheFCC’sruleswillnotpermitanybroadcasterorothermediaentitysubjecttotheFCC’sownershiprulestocontrolorholdanattributableinterestinanLPFMstationorenterintorelatedoperatingagreementswithanLPFMlicensee.Thus,absentawaiver,wecouldnotownorprogramanLPFMstation.LPFMstationsareallocatedthroughouttheFMbroadcastband,(i.e.,88.1to107.9MHz),althoughtheymustoperatewithanoncommercialformat.TheFCChasestablishedallocationrulesthatrequireFMstationstobeseparatedbyspecifieddistancestootherstationsonthesamefrequency,andstationsonfrequenciesonthefirst,secondandthirdchannelsadjacenttothecenterfrequency.TheFCChasgrantedconstructionpermitsandlicensesforLPFMstations.AsrequiredbytheLocalCommunityRadioActof2010,theFCCin2012modifieditsrulestomaintainitsexistingminimumdistanceseparationrequirementsforfull-serviceFMstations,FMtranslatorstations,andFMboosterstationsthatbroadcastradioreadingservicesviaananalogsubcarrierfrequencytoavoidpotentialinterferencebyLPFMstations;andwhenlicensingnewFMtranslatorstations,FMboosterstations,andLPFMstations,toensurethat:(i)licensesareavailabletoFMtranslatorstations,FMboosterstations,andLPFMstations;(ii)suchdecisionsaremadebasedontheneedsofthelocalcommunity;and(iii)FMtranslatorstations,FMboosterstations,andLPFMstationsremainequalinstatusandsecondarytoexistingandmodifiedfull-serviceFMstations.ByNPRMreleasedJuly30,2019(MBDocketsNo.17-105,19-193),theFCCproposedtoamendtherulesfortheLPFMserviceto(1)allowLPFMlicenseesexpandeduseofdirectionalantennasandtousecustommodels;(2)eliminateTV6protectionsentirelyonJuly13,2021,andinstituteawaiverprocessintheinterim;(3)allowLPFMstationstomovetoanyrule-compliantlocationprovidedthatthecurrentandproposedservicecontoursoverlap;and(4)permitLPFM/FMboostercross-ownershipsubjecttoguidelinessimilartothosecurrentlyapplicabletoLPFM/FMtranslatorcross-ownership.TheCompanycannotpredictwhethertheseproposalswillbecomeeffective.OnJanuary5,2012,theFCCreleasedaReporttoCongressontheimpactthatLPFMstationswouldhaveonfull-servicecommercialFMstations.TheFCC“foundnostatisticallyreliableevidencethatlow-powerFMstationshaveasubstantialorconsistenteconomicimpactonfull-servicecommercialFMstations,”15andthat“low-powerFMstationsgenerallydonothave,andinthefutureareunlikelytohave,ademonstrableeconomicimpactonfull-servicecommercialFMradiostations.”SomeLPFMstationsthatbroadcastcommercialannouncementsinviolationofthelawcouldhaveanegativeeconomicimpactontheCompany’sstations.Althoughrule-compliantLPFMstationscompeteforaudiencewiththeCompany’sfull-powerandFMtranslatorstations,theCompanycannotpredictwhethertherewillbefuturenegativeeconomicimpactonitsstations.Aspartofthetransitionfromanalogtodigitaloperations,theFCCsoughtcommentina2014NPRMonwhethertoallowLPTVstations(so-called“FrankenFM”radiostations)ondigitaltelevisionchannel6tocontinuetooperatetheseanalogFMradio-typeservicesonanancillaryorsupplementarybasis.InDecember2019,theFCCaskedpartiestoupdatetherecordonthisissue.NoFrankenFMstationsoperateinanyradiomarketswheretheCompanyoperatesradiostations.DigitalAudioRadioSatelliteServiceandInternetRadio.InadoptingitsrulesfortheDigitalAudioRadioSatelliteService(“DARS”)inthe2310-2360MHzfrequencyband,theFCCstated,“althoughhealthysatelliteDARSsystemsarelikelytohavesomeadverseimpactonterrestrialradioaudiencesize,revenuesandprofits,therecorddoesnotdemonstratethatlicensingsatelliteDARSwouldhavesuchastrongadverseimpactthatitthreatenstheprovisionoflocalservice.”TheFCCgrantedtwonationwidelicenses,onetoXMSatelliteRadio,whichbeganbroadcastinginMay2001,andasecondtoSiriusSatelliteRadio,whichbeganbroadcastinginFebruary2002.Thesatelliteradiosystemsprovidemultiplechannelsofaudioprogramminginexchangeforthepaymentofasubscriptionfee.TheFCCapprovedtheapplicationofSiriusSatelliteRadioInc.andXMSatelliteRadioHoldingsInc.totransfercontrolofthelicensesandauthorizationsheldbythetwocompaniestoonecompany,whichisnowknownasSiriusXMRadio,Inc.VariouscompanieshaveintroduceddevicesthatpermitthereceptionofaudioprogrammingstreamedovertheInternetonhomecomputers,onportablereceivers,suchascellphones,inautomobiles.Andthroughso-called“smartspeakers”likeAmazon’sAlexaservice.AnumberofdigitalmusicprovidershavedevelopedandareofferingtheirproductthroughtheInternet.Terrestrialradiooperators(includingtheCompany)arealsomakingtheirproductavailablethroughtheInternet.Todate,theCompanyhasnotperceivednegativeeconomicimpactfromDARSorInternet-streamedaudioontheCompany’sfull-servicestationsandFMtranslators,possiblydue,inpart,tothepossibilityofconfusioninthedigitaladvertisingmarket,buttheCompanycannotpredictwhethertherewillbefuturenegativeeconomicimpact.In-BandOn-Channel“HybridDigital”Radio.TheFCC’srulespermitradiostationstobroadcastusingin-band,on-channel(IBOC)asthetechnologythatallowsAMandFMstationstooperateusingtheIBOCsystemsdevelopedbyiBiquityDigitalCorporation.Thistechnologyhasbecomecommonlyknownas“hybriddigital”orHDradio.Stationsbroadcastthesamemainchannelprogrammaterialinbothanaloganddigitalmodes.HDradiotechnologypermits“hybrid”operations,thesimultaneoustransmissionofanaloganddigitalsignalswithasingleAMandFMchannel.HDradiotechnologycanprovidenearCD-qualitysoundonFMchannelsandFMqualityonAMchannels.HDradiotechnologyalsopermitsthetransmissionofuptothreeadditionalprogramstreamsovertheradiostations(whichstreamsdonotcountasseparateradiostationsunderthemultipleownershiprules.)Atthepresenttime,weareconfiguredtobroadcastinHDradioon51stations.UseofFMTranslatorsbyAMStationsandDigitalProgramStreams.FMtranslatorstationsarerelativelylowpowerradiostations(maximumERP:250Watts)thatrebroadcasttheprogramsoffull-powerAMandFMstationsonasecondarybasis,meaningtheymustterminateormodifytheiroperationiftheycauseinterferencetoafull-powerstation.TheFCCpermitsAMstationstoberebroadcastonFMtranslatorstationsinordertoimprovereceptionofprogramsbroadcastbyAMstations.TheCompanyintendstocontinuetousesomeofitsexistingFMtranslatorsinconnectionwithsomeofitsAMstations.TheCompanyisusingsomeofitsexistingFMtranslatorstorebroadcastHDradioprogramstreamsgeneratedbysomeofitsFMstations,whichispermittedbytheFCC.Ina2015ReportandOrder,RevitalizationoftheAMService,theFCCannouncedanopportunity,restrictedtoAMlicenseesandpermittees,toapplyforandreceiveauthorizationstorelocateexistingFMtranslatorstationswithin250milesforthesoleandlimitedpurposeofenhancingtheirexistingservicetothepublic.Toimplementthispolicy,theFCCopened“filingwindows,”thelastoneclosingOctober31,2016.SomeoftheCompany’ssubsidiariesthatareAMlicensees,acquiredFMtranslatorsduringthefilingwindow,andrelocatedthemtotheirlocalmarketstopairwith16someoftheCompany’sAMbroadcaststations.TheFMtranslatorssoacquiredmustrebroadcasttherelatedAMstationforatleastfouryears,notcountinganyperiodsofsilence.TheFCClateropenedtwowindowsforthefilingofapplicationsforconstructionpermitsfornewFMtranslators,thefinalwindowclosingJanuary31,2018.Inthefilingwindows,qualifyingAMlicenseescouldapplyforone,andonlyone,newFMtranslatorstation,inthenon-reservedFMbandtobeusedsolelytore-broadcastthelicensee’sAMsignaltoprovidefill-inand/ornighttimeserviceonapermanentbasis.TheCompanyfiledapplicationsinbothwindowsandobtainedsomeconstructionpermitsasaresult.IftheCompanyshoulddecidethatasubsidiaryshouldsellorsuspendoperationsofanAMstationwithsuchanFMconstructionpermitorlicense,thesubsidiarywouldalsoberequiredtosellorsuspendoperationsoftheFMtranslator.TheFCChasadoptednewrulesregardingFMtranslatorinterferenceeffectiveJuly15,2019(1)allowingFMtranslatorstoresolveinterferenceissuesbychangingchannelstoanyavailablesame-bandfrequencyusingaminormodificationapplication;(2)standardizingtheinformationthatmustbecompiledandsubmittedbyastationclaiminginterferencefromanFMtranslator,includingarequiredminimumnumberoflistenercomplaints;(3)establishinginterferencecomplaintresolutionprocedures;and(4)establishinganoutercontourlimitfortheaffectedstationwithinwhichinterferencecomplaintswillbeconsideredactionablewhileprovidingforaprocesstowaivethatlimitinspecialcircumstances.Hart-Scott-RodinoAntitrustImprovementsActof1976.TheFederalTradeCommissionandtheDepartmentofJustice,thefederalagenciesresponsibleforenforcingthefederalantitrustlaws,mayinvestigatecertainacquisitions.UndertheHart-Scott-RodinoAntitrustImprovementsActof1976,anacquisitionmeetingcertainsizethresholdsrequiresthepartiestofileNotificationandReportFormswiththeFederalTradeCommissionandtheDepartmentofJusticeandtoobservespecifiedwaitingperiodrequirementsbeforeconsummatingtheacquisition.AnydecisionbytheFederalTradeCommissionortheDepartmentofJusticetochallengeaproposedacquisitioncouldaffectourabilitytoconsummatetheacquisitionortoconsummateitontheproposedterms.WecannotpredictwhethertheFCCwilladoptrulesthatwouldrestrictourabilitytoacquireadditionalstations.ChangestoApplicationandAssignmentProcedures.TheFCChasadoptedrulesthatgiveNativeAmericantribesaprioritytoobtainbroadcastradiolicensesintribalcommunities.Therulesprovideanopportunityfortribestoestablishnewservicespecificallydesignedtoofferprogrammingthatmeetstheneedsoftribalcitizens.Inaddition,therulesmodifiedtheFCC’sradioapplicationandassignmentprocedures,assistingqualifiedapplicantstomorerapidlyintroducenewradioservicetothepublic.Thesemodifications(1)ProhibitanAMapplicantthatobtainsaconstructionpermitthroughadispositiveSection307(b)preferencefromdowngradingtheservicelevelthatledtothedispositivepreference;(2)RequiretechnicalproposalsfornewormajorchangeAMfacilitiesfiledwithForm175(i.e.,FCC“short-form”Auction)applicationstomeetcertainminimumtechnicalstandardstobeeligibleforfurtherauctionprocessing;and(3)GiveFCCoperatingbureausauthoritytocapfilingwindowapplications.In2011,theFCCreleaseditsThirdReportandOrderwhichlimitseligibilityforauthorizationsassociatedwithallotmentsaddedtotheFMTableofAllotmentsusingthe“TribalPriority”tothetribeswhomtheTribalPrioritywasintendedtobenefit.InOctober2018,theFCCreleaseda“SecondFurtherNoticeofProposedRulemaking”aspartofitsongoingefforttoassistAMbroadcaststationsinprovidingfull-timeservicetotheircommunities.TheFCCisseekingcommentontechnicalproposalstoreducenighttimeinterferenceaffordedtowide-area“ClassA”AMradiostationstoenablemorelocalAMstationstoincreasetheirnighttimeservice.TheCompanyhasnoClassAAMradiostations,buthasClassB,ClassCandClassDAMradiostations,someofwhichmightbenefitiftheFCC’schangesitsrulesasproposed.InaNPRMreleasedNovember22,2019(MBDockets13-249and19-311),theFCCproposedtoallowAMbroadcasterstobroadcastanall-digitalsignalusingtheHDRadioin-bandon-channel(IBOC)modeknownas“MA3,”andsoughtcommentonproposedoperatingstandardsforall-digitalstationsandtheimpactofsuchoperationsonexistinganalogstationsandlisteners.TheCompanypaysfortheuseofmusicbroadcastonitsstationsbyobtaininglicensesfromorganizationscalledperformingrightssocieties,e.g.BroadcastMusic,Inc.(“BMI”),which,inturnpaycomposers,authorsandpublishersfortheirworks.Anotherorganization,GlobalMusicRights,hasbegunissuinglicensesforthecomposers,authorsandpublishersthatitrepresents.Federallawgrantsaperformancerightforsoundrecordingsinfavorofrecordingcompaniesandperformingartistsfornon-interactivedigitaltransmissionsandInternetradio.Asaresult,usersofmusic,includingtheCompany,arerequiredto17payroyaltiesfortheseusesthroughSoundExchange,anon-profitperformancerightsorganization.Periodically,billshavebeenintroducedinCongress,thatifpassed,wouldhaverequiredtheCompanytopayadditionalfeestoanorganizationcalledMusicFirstwhichwoulddistributethemoneytootherentities.EffortscontinuebycertainorganizationstopersuadeCongresstoenactalawthatwouldrequiresuchpayments.Periodically,billshavebeenintroducedinCongressthat,ifadopted,wouldrequiretheCompanytopayadditionalfeestooneormoreorganizationsthatwoulddistributethemoneytoperformersorotherentities.Inlate2018,Congresspassedthe“MusicModernizationAct”whichwassignedintolawbythePresident.Thelaw(1)improvescompensationtosongwritersandstreamlininghowtheirmusicislicensed;(2)enableslegacyartists(whorecordedmusicbefore1972)tobepaidroyaltieswhentheirmusicisplayedondigitalradio;and(3)providesaconsistentlegalprocessforstudioprofessionals,includingrecordproducersandengineerstoreceiveroyaltiesfortheircontributionstomusicthattheyhelptocreate.Thelawcreatesablanketlicensefordigitalmusicproviderstomakepermanentdownloads,limiteddownloads,andinteractivestreams,createsacollectivetoadministertheblanketlicense,andmakesvariousimprovementstoroyaltyrateproceedings.ThisnewlawcouldimposeanadditionalfinancialburdenontheCompany,buttheextentoftheburdenwoulddependonhowthefeepaymentrequirementwasstructured.TheAskMusiciansforMusic(AM/FM)Actof2019wasintroducedonNovember14,2019inbothhousesofCongressandwouldrequirebroadcasterstoobtainpermissionbeforetransmittingcontentownedbyanotherperson.TheCompanycannotpredictwhetherthislegislationwillbeenactedintolaw,andifso,whethertherewouldbeadverseimpactontheCompany’sbusiness.OnJanuary3,2013,theFCCreleasedtheSixthFurtherNoticeofProposedRulemaking,whichsoughtcommentontherequirementthatpersonswithattributableinterestsinbroadcastlicenseesandotherentitiesfilinganFCCOwnershipReportprovidean“FCCRegistrationNumber”(“FRN”)linkedtotheirsocialsecuritynumbers.QuestionshadbeenraisedaboutthesecurityoftheFCC’sRegistrationSystemwherethisdatawouldbestored.OnJanuary20,2016,theFCCreleaseditsReportandOrder,SecondReportandOrderandOrderonReconsiderationthatimplementedaRestrictedUseFRN(RUFRN)thatindividualsmayusesolelyforthepurposeofbroadcastownershipreportfilings.TheFCCstateditsbeliefthattheRUFRNwouldallowforsufficientuniqueidentificationofindividualslistedonbroadcastownershipreportswithoutnecessitatingthedisclosuretotheFCCofindividuals’fullSocialSecurityNumbers(SSNs).TheFCCeliminatedtheavailabilityoftheSpecialUseFRN(SUFRN)forbroadcaststationownershipreports,exceptinverylimitedcircumstances.OnJanuary4,2017,theFCC’sMediaBureauissuedanOrderorReconsiderationdenyingpetitionsforreconsiderationoftherequirement.OnFebruary2,2017,theFCCsetasidetheOrderonReconsiderationandreturnedthepetitionsforreconsiderationtopendingstatustobeconsideredbythefullFCC.TheFCCisalsoseekingcommentonwhethertoexpandthebiennialownershipreportingrequirementtoincludeinterests,entitiesandindividualsthatarenotattributablebecauseof(a)thesinglemajorityshareholderexemptionand(b)theexemptionforinterestsheldineligibleentitiespursuanttothehigherEDPthreshold.TheCompanyhasutilizedthesinglemajorityshareholderexemptioninreportingownershipinterestsintheCompany.TheCompanycannotpredictwhethertheseproposalswillbeadopted,andifso,whetherinformationprovidedbythosepersonswithareportableattributableinterestintheCompanywillbesecure.ProposedChanges.TheFCChasunderconsideration,andmayinthefutureconsiderandadopt,newlaws,regulationsandpoliciesregardingawidevarietyofmattersthatcould,directlyorindirectly,affectusandtheoperationandownershipofourbroadcastproperties.ApplicationprocessingrulesadoptedbytheFCCmightrequireustoapplyforfacilitiesmodificationstoourstandardbroadcaststationsinfuture“window”periodsforfilingapplicationsorresultinthestationsbeing“lockedin”withtheirpresentfacilities.TheFCCisauthorizedtouseauctionsfortheallocationofradiobroadcastspectrumfrequenciesforcommercialuse.Theimplementationofthislawcouldrequireustobidfortheuseofcertainfrequencies.18ExecutiveOfficersOurcurrentexecutiveofficersare:NameAgePositionEdwardK.Christian75President,ChiefExecutiveOfficerandChairman;DirectorSamuelD.Bush62SeniorVicePresident,TreasurerandChiefFinancialOfficerMarciaK.Lobaito71SeniorVicePresident,CorporateSecretary,andDirectorofBusinessAffairsCatherineA.Bobinski60SeniorVicePresident/Finance,ChiefAccountingOfficerandCorporateControllerChristopherS.Forgy59SeniorVicePresidentofOperationsOfficersareelectedannuallybyourBoardofDirectorsandserveatthediscretionoftheBoard.Setforthbelowisinformationwithrespecttoourexecutiveofficers.Mr.ChristianhasbeenPresident,ChiefExecutiveOfficerandChairmansinceourinceptionin1986.Mr.BushhasbeenSeniorVicePresidentsince2002andChiefFinancialOfficerandTreasurersinceSeptember1997.HewasVicePresidentfrom1997to2002.From1988to1997heheldvariouspositionswiththeMediaFinanceGroupatAT&TCapitalCorporation,includingseniorvicepresident.Ms.LobaitohasbeenSeniorVicePresidentsince2005,DirectorofBusinessAffairsandCorporateSecretarysinceourinceptionin1986andVicePresidentfrom1996to2005.InJanuary2020,weissuedapressreleaseannouncingthatMs.LobaitohadinformedusthatshewillberetiringasSeniorVicePresidentandDirectorofBusinessAffairs,effectiveMarch13,2020.Atourrequest,Ms.LobaitowillcontinuetoserveasCorporateSecretary.Ms.BobinskihasbeenSeniorVicePresident/FinancesinceMarch2012andChiefAccountingOfficerandCorporateControllersinceSeptember1991.ShewasVicePresidentfromMarch1999toMarch2012.Ms.Bobinskiisacertifiedpublicaccountant.Mr.ForgyhasbeenSeniorVicePresidentofOperationssinceMay2018.HewasPresident/GeneralManagerofourColumbus,Ohiomarketfrom2010to2018andwasDirectorofSalesofourColumbus,Ohiomarketfrom1995to2006.HehasbeenwithSagafor20years.19Item1A.RiskFactorsThemoreprominentrisksanduncertaintiesinherentinourbusinessaredescribedinmoredetailbelow.However,thesearenottheonlyrisksanduncertaintiesweface.Ourbusinessmayfaceadditionalrisksanduncertaintiesthatareunknowntousatthistime.GlobalEconomicConditionsandUncertaintiesMayContinuetoAffectourBusinessWederiverevenuesfromthesaleofadvertisingandexpendituresbyadvertiserstendtobecyclicalandarereflectiveofeconomicconditions.Periodsofaslowingeconomy,recessionoreconomicuncertaintymaybeaccompaniedbyadecreaseinadvertising.Theglobaleconomicdownturnthatbeganin2008causedadeclineinadvertisingandmarketingbyourcustomers,whichhadanadverseeffectonourrevenue,profitmarginsandcashflows.Globaleconomicconditionshavebeenslowtorecoverandremainuncertain.Therecanbenoassurancethatanyoftherecenteconomicimprovementswillbebroadbasedandsustainable,orthattheywillenhanceconditionsinmarketsrelevanttous.Ifeconomicconditionsdonotcontinuetoimprove,economicuncertaintyincreasesoreconomicconditionsdeteriorateagain;globaleconomicconditionsmayonceagainadverselyimpactourbusiness.Duetothecontinueduncertainpaceofeconomicgrowth,wecannotpredictfuturerevenuetrends.Further,therecanbenoassurancethatwewillnotexperiencefutureadverseeffectsthatmaybematerialtoourcashflows,competitiveposition,financialcondition,resultsofoperations,orourabilitytoaccesscapital.Thevolatilityinglobalfinancialmarketsmayalsolimitourabilitytoaccessthecapitalmarketsatatimewhenwewouldlike,orneed,todoso,whichcouldhaveanimpactonourflexibilitytoreacttochangingeconomicandbusinessconditions.Accordingly,iftheeconomydoesnotfullyrecoverorworsens,ourbusiness,resultsofoperationsandfinancialconditioncouldbemateriallyandadverselyaffected.WeHaveSubstantialIndebtednessandDebtServiceRequirementsAtDecember31,2019ourlong-termdebtwasapproximately$10,000,000.Wehaveborrowedandexpecttocontinuetoborrowtofinanceacquisitionsandforothercorporatepurposes.Becauseofourindebtedness,aportionofourcashflowfromoperationsisrequiredfordebtservice.Ourleveragecouldmakeusvulnerabletoanincreaseininterestrates,adownturninouroperatingperformance,oradeclineingeneraleconomicconditions.Thecreditfacilityissubjecttomandatoryprepaymentrequirements,includingbutnotlimitedto,certainsalesofassets,certaininsuranceproceeds,certaindebtissuancesandcertainsalesofequity.AnyoutstandingbalanceunderthecreditfacilitywillbedueonthematuritydateofJune27,2023.Webelievethatcashflowsfromoperationswillbesufficienttomeetourdebtservicerequirementsforinterestandscheduledpaymentsofprincipalunderthecreditfacility.However,ifsuchcashflowisnotsufficient,wemayberequiredtoselladditionalequitysecurities,refinanceourobligationsordisposeofoneormoreofourpropertiesinordertomakesuchscheduledpayments.Wecannotbesurethatwewouldbeabletoaffectanysuchtransactionsonfavorableterms,ifatall.TheexpectedLIBORphase-outmayhaveunpredictableimpactsoncontractualmechanicsinthecreditmarketsorthebroaderfinancialmarkets,whichcouldhaveanadverseeffectonourresultsofoperations.TheU.K.FinancialConductAuthority,whichregulatesLIBOR,intendstoceaseencouragingorrequiringbankstosubmitratesforthecalculationofLIBORafter2021.ItisunclearwhetherLIBORwillceasetoexistafterthatdate,andthereiscurrentlynoglobalconsensusonwhatrateorrateswillbecomeacceptablealternatives.IntheUnitedStates,theU.S.FederalReserveBoard-ledindustrygroup,theAlternativeReferenceRatesCommittee,selectedtheSecuredOvernightFinancingRate(“SOFR”)asanalternativetoLIBORforU.S.dollar-denominatedLIBOR-benchmarkedobligations.SOFRisabroadmeasureofthecostofborrowingcashintheovernightU.Streasuryrepomarket,andtheFederalReserveBankofNewYorkhaspublishedthedailyratesince2018.Nevertheless,becauseSOFRisafullysecuredovernightrateandLIBORisaforward-lookingunsecuredrate,SOFRislikelytobelowerthanLIBORonmostdates,andanyspreadadjustmentappliedbymarketparticipantstoalleviateanymismatchduringatransitionperiodwillbesubjecttomethodologythatremainsundefined.20OurDebtCovenantsRestrictourFinancialandOperationalFlexibilityOurcreditfacilitycontainsanumberoffinancialcovenantswhich,amongotherthings,requireustomaintainspecifiedfinancialratiosandimposecertainlimitationsonuswithrespecttoinvestments,additionalindebtedness,dividends,distributions,guarantees,liensandencumbrances.Ourabilitytomeetthesefinancialratioscanbeaffectedbyoperatingperformanceorothereventsbeyondourcontrol,andwecannotassureyouthatwewillmeetthoseratios.Certaineventsofdefaultunderourcreditfacilitycouldallowthelenderstodeclareallamountsoutstandingtobeimmediatelydueandpayableand,therefore,couldhaveamaterialadverseeffectonourbusiness.Wehavepledgedsubstantiallyallofourassets(excludingourFCClicensesandcertainotherassets)insupportofthecreditfacilityandeachofoursubsidiarieshasguaranteedthecreditfacilityandhaspledgedsubstantiallyalloftheirassets(excludingtheirFCClicensesandcertainotherassets)insupportofthecreditfacility.WeDependonKeyPersonnelOurbusinessispartiallydependentupontheperformanceofcertainkeyindividuals,particularlyEdwardK.Christian,ourPresidentandCEO.Althoughwehaveenteredintoemploymentandnon-competitionagreementswithMr.Christian,whichterminateonMarch31,2025,andcertainotherkeypersonnel,includingon-airpersonalities,wecannotbesurethatsuchkeypersonnelwillremainwithus.Wecangivenoassurancethatalloranyoftheseemployeeswillremainwithusorwillretaintheiraudiences.Manyofourkeyemployeesareat-willemployeeswhoareundernolegalobligationtoremainwithus.Ourcompetitorsmaychoosetoextendofferstoanyoftheseindividualsontermswhichwemaybeunwillingtomeet.Inaddition,anyorallofourkeyemployeesmaydecidetoleaveforavarietyofpersonalorotherreasonsbeyondourcontrol.Furthermore,thepopularityandaudienceloyaltyofourkeyon-airpersonalitiesishighlysensitivetorapidlychangingpublictastes.Alossofsuchpopularityoraudienceloyaltyisbeyondourcontrolandcouldlimitourabilitytogeneraterevenues.WeDependonKeyStationsHistoricallyourtopfivemarketswhencombinedrepresented39%,41%,and41%ofournetoperatingrevenuefortheyearsendedDecember31,2019,2018and2017,respectively.Accordingly,wemayhavegreaterexposuretoadverseeventsorconditionsthataffecttheeconomyinanyofthesemarkets,whichcouldhaveamaterialadverseeffectonourrevenue,resultsofoperationsandfinancialcondition.LocalandNationalEconomicConditionsMayAffectourAdvertisingRevenueOurfinancialresultsaredependentprimarilyonourabilitytogenerateadvertisingrevenuethroughrateschargedtoadvertisers.Theadvertisingratesastationisabletochargeareaffectedbymanyfactors,includingthegeneralstrengthofthelocalandnationaleconomies.Generally,advertisingdeclinesduringperiodsofeconomicrecessionordownturnsintheeconomy.Ourrevenuehasbeenandislikelytobeadverselyaffectedduringsuchperiods,whethertheyoccuronanationallevelorinthegeographicmarketsinwhichweoperate.Duringsuchperiodswemayalsoberequiredtoreduceouradvertisingratesinordertoattractavailableadvertisers.Suchadeclineinadvertisingratescouldalsohaveamaterialadverseeffectonourrevenue,resultsofoperationsandfinancialcondition.OurStationsMustCompeteforAdvertisingRevenuesinTheirRespectiveMarketsRadiobroadcastingisahighlycompetitivebusiness.Ourstationscompeteforlistenersandadvertisingrevenueswithintheirrespectivemarketsdirectlywithotherradiostations,aswellaswithothermedia,suchasbroadcastradio(asapplicable),cabletelevisionand/orradio,satellitetelevisionand/orsatelliteradiosystems,newspapers,magazines,directmail,theInternet,couponsandbillboardadvertising.Audienceratingsandmarketsharesaresubjecttochange,andanychangeinaparticularmarketcouldhaveamaterialadverseeffectontherevenueofourstationslocatedinthatmarket.Whilewealreadycompeteinsomeofourmarketswithotherstationswithsimilarprogrammingformats,ifanotherradiostationinamarketweretoconvertitsprogrammingformattoaformatsimilartooneofourstations,ifanewstationweretoadoptacomparableformatorifanexistingcompetitorweretostrengthenitsoperations,ourstationscouldexperienceareductioninratingsand/oradvertisingrevenueandcouldincurincreasedpromotionalandotherexpenses.Otherradiobroadcastingcompaniesmayenterintothemarketsinwhichweoperateormay21operateinthefuture.Thesecompaniesmaybelargerandhavemorefinancialresourcesthanwehave.Wecannotassureyouthatanyofourstationswillbeabletomaintainorincreasetheircurrentaudienceratingsandadvertisingrevenues.OurSuccessDependsonourAbilitytoIdentify,ConsummateandIntegrateAcquiredStationsAspartofourstrategy,wehavepursuedandmaycontinuetopursueacquisitionsofadditionalradiostations,subjecttothetermsofourcreditfacility.Broadcastingisarapidlyconsolidatingindustry,withmanycompaniesseekingtoconsummateacquisitionsandincreasetheirmarketshare.Inthisenvironment,wecompeteandwillcontinuetocompetewithmanyotherbuyersfortheacquisitionofradiostations.Someofthosecompetitorsmaybeabletooutbidusforacquisitionsbecausetheyhavegreaterfinancialresources.Asaresultoftheseandotherfactors,ourabilitytoidentifyandconsummatefutureacquisitionsisuncertain.Ourconsummationofallfutureacquisitionsissubjecttovariousconditions,includingFCCandotherregulatoryapprovals.TheFCCmustapproveanytransferofcontrolorassignmentofbroadcastlicenses.SuchacquisitionscouldbedelayedbyshutdownsoftheU.S.Government.Inaddition,acquisitionsmayencounterintensescrutinyunderfederalandstateantitrustlaws.OurfutureacquisitionsmaybesubjecttonotificationundertheHart-Scott-RodinoAntitrustImprovementsActof1976andtoawaitingperiodandpossiblereviewbytheDepartmentofJusticeandtheFederalTradeCommission.Anydelays,injunctions,conditionsormodificationsbyanyofthesefederalagenciescouldhaveanegativeeffectonusandresultintheabandonmentofallorpartofattractiveacquisitionopportunities.Wecannotpredictwhetherwewillbesuccessfulinidentifyingfutureacquisitionopportunitiesorwhattheconsequenceswillbeofanyacquisitions.Certainofouracquisitionsmayproveunprofitableandfailtogenerateanticipatedcashflows.Inaddition,thesuccessofanycompletedacquisitionwilldependonourabilitytoeffectivelyintegratetheacquiredstations.Theprocessofintegratingacquiredstationsmayinvolvenumerousrisks,includingdifficultiesintheassimilationofoperations,thediversionofmanagement’sattentionfromotherbusinessconcerns,riskofenteringnewmarkets,andthepotentiallossofkeyemployeesoftheacquiredstations.FutureImpairmentofourFCCBroadcastingLicensesCouldAffectourOperatingResultsAsofDecember31,2019,ourFCCbroadcastinglicensesrepresented37.8%ofourtotalassets.WearerequiredtotestourFCCbroadcastinglicensesforimpairmentonanannualbasis,ormorefrequentlyifeventsorchangesincircumstancesindicatethatourFCCbroadcastinglicensesmightbeimpairedwhichmayresultinfutureimpairmentlosses.Forfurtherdiscussion,seeItem7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations—CriticalAccountingPoliciesandEstimatesincludedwiththisForm10-K.OnJanuary24,2020,thePresidentsignedintolawthe“PIRATE”ActwhichauthorizestheFCCtofineillegalbroadcastersupto$2million.OurBusinessisSubjecttoExtensiveFederalRegulationThebroadcastingindustryissubjecttoextensivefederalregulationwhich,amongotherthings,requiresapprovalbytheFCCoftransfers,assignmentsandrenewalsofbroadcastinglicenses,limitsthenumberofbroadcastingpropertiesthatmaybeacquiredwithinaspecificmarket,andregulatesprogrammingandoperations.Foradetaileddescriptionofthematerialregulationsapplicabletoourbusiness,see“FederalRegulationofRadioandTelevisionBroadcasting”and“OtherFCCRequirements”inItem1ofthisForm10-K.Failuretocomplywiththeseregulationscould,undercertaincircumstancesandamongotherthings,resultinthedenialorrevocationofFCClicenses,shortenedlicenserenewalterms,monetaryforfeituresorotherpenaltieswhichwouldadverselyaffectourprofitability.Changesinownershiprequirementscouldlimitourabilitytoownoracquirestationsincertainmarkets.NewFederalRegulationsorFeesCouldAffectourBroadcastingOperationsTherehasbeenproposedlegislationinthepastandtherecouldbeagaininthefuturethatrequiresradiobroadcasterstopayadditionalfeessuchasaspectrumfeefortheuseofthespectrumoraroyaltyfeetorecordlabelsandperformingartistsforuseoftheirrecordedmusic.Currently,wepayroyaltiestosong22composers,publishers,andperformersindirectlythroughthirdparties.Anyproposedlegislationthatisadoptedintolawcouldaddanadditionallayerofroyaltiestobepaiddirectlytotherecordlabelsandartists.Whilethisproposedlegislationdidnotbecomelaw,ithasbeenthesubjectofconsiderabledebateandactivitybythebroadcastindustryandotherpartiesaffectedbythelegislation.Itiscurrentlyunknownwhatimpactanypotentialrequiredroyaltypaymentswouldhaveonourresultsofoperations,cashflowsorfinancialposition.TheFCC’sVigorousEnforcementofIndecencyRulesCouldAffectourBroadcastingOperationsFederallawregulatesthebroadcastofobscene,indecentorprofanematerial.TheFCChasincreaseditsenforcementeffortsrelatingtotheregulationofindecencyviolations,andCongresshasincreasedthepenaltiesforbroadcastingobscene,indecentorprofaneprogramming,andthesepenaltiesmaypotentiallysubjectbroadcasterstolicenserevocation,renewalorqualificationproceedingsintheeventthattheybroadcastsuchmaterial.Themaximumforfeiturepenaltyforanindecencyviolationis$414,454perincidentand$3,825,726foracontinuingviolationarisingfromasingleactorfailuretoact.InMarch2015,theFCCissuedaNoticeofApparentLiabilityforthethenmaximumforfeitureamountof$325,000againstatelevisionstationforviolationoftheindecencylaws.Inaddition,theFCC’sheightenedfocusontheindecencyregulationsagainstthebroadcastindustrymayencouragethirdpartiestoopposeourlicenserenewalapplicationsorapplicationsforconsenttoacquirebroadcaststations.BecausetheFCCmayinvestigateindecencycomplaintspriortonotifyingalicenseeoftheexistenceofacomplaint,alicenseemaynothaveknowledgeofacomplaintunlessanduntilthecomplaintresultsintheissuanceofaformalFCCletterofinquiryornoticeofapparentliabilityforforfeiture.Wemayinthefuturebecomesubjecttoinquiriesorproceedingsrelatedtoourstations’broadcastofobscene,indecentorprofanematerial.Totheextentthatanyinquiriesorotherproceedingsresultintheimpositionoffines,asettlementwiththeFCC,revocationofanyofourstationlicensesordenialsoflicenserenewalapplications,ourresultofoperationsandbusinesscouldbemateriallyadverselyaffected.NewTechnologiesMayAffectourBroadcastingOperationsTheFCChasandisconsideringwaystointroducenewtechnologiestothebroadcastingindustry,includingsatelliteandterrestrialdeliveryofdigitalaudiobroadcastingandthestandardizationofavailabletechnologieswhichsignificantlyenhancethesoundqualityofAMbroadcasters.Weareunabletopredicttheeffectsuchtechnologiesmayhaveonourbroadcastingoperations.Thecapitalexpendituresnecessarytoimplementsuchtechnologiescouldbesubstantial.TheCompanyisControlledbyourPresident,ChiefExecutiveOfficerandChairmanAsofMarch4,2020,EdwardK.Christian,ourPresident,ChiefExecutiveOfficerandChairman,holdsapproximately65%ofthecombinedvotingpowerofourCommonStock(notincludingoptionstoacquireClassBCommonStockandbasedonClassBsharesgenerallyentitledtotenvotespershare).Asaresult,Mr.Christiangenerallyisabletocontrolthevoteonmostmatterssubmittedtothevoteofstockholdersand,therefore,isabletodirectourmanagementandpolicies,exceptwithrespectto(i)theelectionofthetwoClassAdirectors,(ii)thosematterswherethesharesofourClassBCommonStockareonlyentitledtoonevotepershare,and(iii)othermattersrequiringaclassvoteundertheprovisionsofourcertificateofincorporation,bylawsorapplicablelaw.ForadescriptionofthevotingrightsofourCommonStock,seeNote12oftheNotestoConsolidatedFinancialStatementsincludedwiththisForm10-K.WithouttheapprovalofMr.Christian,wewillbeunabletoconsummatetransactionsinvolvinganactualorpotentialchangeofcontrol,includingtransactionsinwhichstockholdersmightotherwisereceiveapremiumfortheirsharesoverthen-currentmarketprices.WeMayExperienceVolatilityintheMarketPriceofourCommonStockThemarketpriceofourcommonstockhasfluctuatedinthepastandmaycontinuetobevolatile.Inadditiontostockmarketfluctuationsduetoeconomicorotherfactors,thevolatilityofoursharesmaybeinfluencedbylowertradingvolumeandconcentratedownershiprelativetomanyofourpublicly-heldcompetitors.Becauseseveralofourshareholdersownsignificantportionsofouroutstandingshares,ourstockisrelativelylessliquidandthereforemoresusceptibletopricefluctuationsthanmanyothercompanies’23shares.Iftheseshareholdersweretosellalloraportionoftheirholdingsofourcommonstock,thenthemarketpriceofourcommonstockcouldbenegativelyaffected.Investorsshouldbeawarethattheycouldexperienceshort-termvolatilityinourstockifsuchshareholdersdecidetosellalloraportionoftheirholdingsofourcommonstockatonceorwithinashortperiodoftime.InformationtechnologyandcybersecurityfailuresordatasecuritybreachescouldharmourbusinessAnyinternaltechnologyerrororfailureimpactingsystemshostedinternallyorexternally,oranylarge-scaleexternalinterruptionintechnologyinfrastructurewedependon,suchaspower,telecommunicationsortheInternet,maydisruptourtechnologynetwork.Anyindividual,sustainedorrepeatedfailureoftechnologycouldimpactourcustomerserviceandresultinincreasedcostsorreducedrevenues.Ourtechnologysystemsandrelateddataalsomaybevulnerabletoavarietyofsourcesofinterruptionduetoeventsbeyondourcontrol,includingnaturaldisasters,terroristattacks,telecommunicationsfailures,computerviruses,hackersandothersecurityissues.Whilewehaveinplace,andcontinuetoinvestin,technologysecurityinitiativesanddisasterrecoveryplans,thesemeasuresmaynotbeadequateorimplementedproperlytopreventabusinessdisruptionanditsadversefinancialandconsequencestoourbusiness’reputation.Inaddition,asapartofourordinarybusinessoperations,wemaycollectandstoresensitivedata,includingpersonalinformationofourclients,listenersandemployees.Thesecureoperationofthenetworksandsystemsonwhichthistypeofinformationisstored,processedandmaintainediscriticaltoourbusinessoperationsandstrategy.Anycompromiseofourtechnologysystemsresultingfromattacksbyhackersorbreachesduetoemployeeerrorormalfeasancecouldresultintheloss,disclosure,misappropriationoforaccesstoclients’,listeners’,employees’orbusinesspartners’information.Anysuchloss,disclosure,misappropriationoraccesscouldresultinlegalclaimsorproceedings,liabilityorregulatorypenaltiesunderlawsprotectingtheprivacyofpersonalinformation,disruptoperationsanddamageourreputation,anyorallofwhichcouldadverselyaffectourbusiness.Item1B.UnresolvedStaffCommentsNone.Item2.PropertiesOurcorporateheadquartersislocatedinGrossePointeFarms,Michigan.Thetypesofpropertiesrequiredtosupporteachofourstationsincludeoffices,studios,andtransmitterandantennasites.Astation’sstudiosaregenerallyhousedwithitsofficesinbusinessdistricts.Thetransmittersitesandantennasitesaregenerallylocatedsoastoprovidemaximummarketcoverageforourstations’broadcastsignals.AsofDecember31,2019,thestudiosandofficesof25ofour28operatinglocations,includingourcorporateheadquartersinMichigan,arelocatedinfacilitiesweown.Theremainingstudiosandofficesarelocatedinleasedfacilitieswithleasetermsthatexpirein2.5yearsto5years.Weownorleaseourtransmitterandantennasites,withleasetermsthatexpirein6monthsto71years.Wedonotanticipateanydifficultiesinrenewingthoseleasesthatexpirewithinthenextfiveyearsorinleasingotherspace,ifrequired.Noonepropertyismaterialtoouroveralloperations.Webelievethatourpropertiesareingoodconditionandsuitableforouroperations.Weownsubstantiallyalloftheequipmentusedinourbroadcastingbusiness.Item3.LegalProceedingsTheCompanyissubjecttovariousoutstandingclaimswhichariseintheordinarycourseofbusinessandtootherlegalproceedings.ManagementanticipatesthatanypotentialliabilityoftheCompany,whichmayariseoutoforwithrespecttothesematters,willnotmateriallyaffecttheCompany’sfinancialstatements.Item4.MineSafetyDisclosuresNotapplicable.24PARTIIItem5.MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecuritiesOurClassACommonStocktradesontheNASDAQGlobalMarketoftheNASDAQStockMarketLLCunderthetickersymbolSGA.ThereisnopublictradingmarketforourClassBCommonStock.TheclosingpriceforourClassACommonStockonMarch4,2020asreportedbytheNASDAQwas$27.41.AsofMarch4,2020,therewereapproximately170holdersofrecordofourClassACommonStock,andoneholderofourClassBCommonStock.DividendsDuring2019,ourBoardofDirectorsdeclaredfourquarterlycashdividendstotaling$1.20pershareonitsClassesAandBshares.Thesedividendstotalingapproximately$7.1millionwereaccruedorpaidduring2019.SeeNote1ofthefinancialstatementsforspecificdetailsonthedividends.During2018,ourBoardofDirectorsdeclaredfourquarterlycashdividendsandaspecialcashdividendtotaling$1.45pershareonitsClassesAandBshares.Thesedividendstotalingapproximately$8.6millionwereaccruedorpaidduring2018.SeeNote1ofthefinancialstatementsforspecificdetailsonthedividends.During2017,ourBoardofDirectorsdeclaredfourquarterlycashdividendsandaspecialcashdividendtotaling$2.00pershareonitsClassesAandBshares.Thesedividendstotalingapproximately$11.8millionwereaccruedorpaidduring2017.SeeNote1ofthefinancialstatementsforspecificdetailsonthedividends.SecuritiesAuthorizedforIssuanceUnderEquityCompensationPlanInformationThefollowingtablesetsforthasofDecember31,2019,thenumberofsecuritiesoutstandingunderourequitycompensationplans,theweightedaverageexercisepriceofsuchsecuritiesandthenumberofsecuritiesavailableforgrantundertheseplans:(a)(b)(c)PlanCategoryNumberofSharestobeIssuedUponExerciseofOutstandingOptionsWarrants,andRightsWeighted-AverageExercisePriceofOutstandingOptions,WarrantsandRightsNumberofSecuritiesRemainingAvailableforFutureIssuanceUnderEquityCompensationPlans(ExcludingColumn(a))EquityCompensationPlansApprovedbyStockholders:Employees’401(k)SavingsandInvestmentPlan........—$—520,6652005IncentiveCompensationPlan.................128,224(1)$0.00(2)326,650EquityCompensationPlansNotApprovedbyStockholders:None.....................................——Total.......................................128,224847,315(1)All128,224sharesarerestrictedstock.(2)Weighted-AverageExercisePriceofOutstandingOptionsis$0.00astheyareallrestrictedstock.RecentSalesofUnregisteredSecuritiesNotapplicable.25IssuerPurchasesofEquitySecuritiesThefollowingtablesummarizesourrepurchasesofourClassACommonStockduringthethreemonthsendedDecember31,2019.Sharesrepurchasedduringthequarterwerefromtheretentionofsharesforthepaymentofwithholdingtaxesrelatedtothevestingofrestrictedstock.PeriodTotalNumberofSharesPurchasedAveragePricePaidperShareTotalNumberofSharesPurchasedasPartofPubliclyAnnouncedProgramApproximateDollarValueofSharesthatMayYetbePurchasedUndertheProgram(a)October1–October31,2019.................138$29.840—$19,799,944November1–November30,2019..............18,676$30.290—$19,234,248December1–December31,2019...............—$——$19,234,248Total...................................18,814$30.287—$19,234,248(a)WehaveaStockBuy-BackProgramwhichallowsustopurchaseourClassACommonStock.InFebruary2013,ourBoardofDirectorsauthorizedanincreaseintheamountcommittedtotheBuy-BackProgramfrom$60milliontoapproximately$75.8million.26PerformanceGraphCOMMONSTOCKPERFORMANCESetforthbelowisalinegraphcomparingthecumulativetotalstockholderreturnfortheyearsendedDecember31,2015,2016,2017,2018and2019ofourClassACommonStockagainstthecumulativetotalreturnofourIndextheNASDAQStockMarket(USCompanies)andaPeerGroupselectedbyusconsistingofthefollowingradiobroadcastcompanies:BeasleyBroadcastGroup,Inc.,CumulusMediaInc.,EmmisCommunicationsCorp.,EntercomCommunicationsCorp.,EntravisionCommunicationsCorp.,iHeartCommunications,Inc.,TheNielsenCompany,RadioOneInc.,SagaCommunications,Inc.,SalemCommunicationsCorp.,SiriusXMRadioInc.,SpanishBroadcastingSystem,Inc.,andTownsquareMedia,Inc.Thegraphandtableassumethat$100wasinvestedonDecember31,2014,ineachofourClassACommonStock,theNASDAQStockMarket(USCompanies)andthePeerGroupandthatalldividendswerereinvested.Theinformationcontainedinthisgraphshallnotbedeemedtobe“solicitingmaterial”or“filed”withtheSECorsubjecttotheliabilitiesofSection18oftheExchangeAct,excepttotheextentthatwespecificallyincorporateitbyreferenceintoadocumentfiledundertheSecuritiesActortheExchangeAct.LegendSymbolTotalReturnFor:12/1412/1512/1612/1712/1812/19SagaCommunicationsInc.100.0090.93122.57103.0888.0883.72CRSPNasdaqStockMarketUS100.00107.71118.26152.91150.41204.71PeerGroup100.00106.77109.50117.51106.26124.23ThecomparisonsintheabovetablearerequiredbytheSEC.ThistableisnotintendedtoforecastortobeindicativeofanyfuturereturnofourClassACommonStock.27Item6.SelectedFinancialDataYearsEndedDecember31,2019(1)20182017(3)(4)2016(3)(5)2015(3)(6)(Inthousandsexceptpershareamounts)OPERATINGDATA:NetOperatingRevenue..................$123,072$124,829$118,149$118,955$111,792StationOperatingExpense...............92,69293,72787,75986,79983,188CorporateGeneralandAdministrative.......11,46011,35911,65710,98010,091OtherOperating(Income)Expense,net......1126155(1,351)509ImpairmentofIntangibleAssets...........——1,449—874OperatingIncomeFromContinuingOperations.........................$18,808$19,682$17,229$22,527$17,130InterestExpense.......................$735$946$903$744$855NetIncome:FromContinuingOperations............$13,279$13,690$22,246$12,910$9,146FromDiscontinuedOperations..........——32,4715,2764,268NetIncome........................$13,279$13,690$54,717$18,186$13,414BasicEarnings(Loss)PerShare:FromContinuingOperations............$2.23$2.30$3.77$2.20$1.58FromDiscontinuedOperations..........——5.500.900.73EarningsPerShare...................$2.23$2.30$9.27$3.10$2.31WeightedAverageCommonShares.........5,8345,8295,8035,7615,706DilutedEarnings(Loss)PerShare:FromContinuingOperations............$2.23$2.30$3.77$2.19$1.56FromDiscontinuedOperations..........——5.500.900.73EarningsPerShare...................$2.23$2.30$9.27$3.09$2.29WeightedAverageCommonandCommonEquivalentShares....................5,8345,8295,8075,7715,740CashDividendsDeclaredPerCommonShare...........................$1.201.452.001.301.10December31,20192018(2)2017(3)(4)2016(3)(5)2015(3)(6)(Inthousands)BALANCESHEETDATA:WorkingCapital.......................$49,219$45,430$55,269$36,727$32,450NetPropertyandEquipment..............$58,711$59,103$56,235$49,174$50,277NetIntangibleandOtherAssets...........$126,963$120,779$116,360$118,052$106,399TotalAssets..........................$252,394$248,477$248,769$219,998$203,464Long-termDebtIncludingCurrentPortion....$10,000$20,000$25,000$35,287$35,287Stockholders’Equity...................$192,352$184,999$179,465$134,982$122,816(1)ReflectstheresultsofWOGK-FM,WNDT-FM,WNDD-FM,andWNDN-FMacquiredonDecember31,2018.28(2)ReflectstheassetsandliabilitiesofWOGK-FM,WNDT-FM,WNDD-FM,andWNDN-FMacquiredonDecember31,2018.(3)OnSeptember1,2017,theCompanysoldtheJoplin,MissouriandVictoria,Texastelevisionstations.Thehistoricalresultsofoperationsforthetelevisionstationsarepresentedinthediscontinuedoperationsforallperiodspresented.(4)ReflectstheresultsofWCVL-FMoperatedunderthetermsofanLMAfromFebruary1,2015untilacquiredonApril18,2017.ReflectstheresultsofWCKN-FM,WMXF-FM,WXST-FM,WAVF-FM,WSPO-AM,W261-DG,W257BQ,WVSC-FM,WLHH-FM,WOEX-FM,W256CB,W293BZacquiredonSeptember1,2017.(5)ReflectstheresultsofWLVQ-FMoperatedunderthetermsofanLMAfromNovember16,2015untilacquiredinFebruary2016.(6)ReflectstheresultsofWSVA-AM,WHBG-AM,WQPO-FM,WWRE-FM,andWMQR-FMacquiredinAugust2015andWSIG-FMacquiredinSeptember2015.ReflectstheresultsofWLVQ-FMoperatedunderthetermsofanLMAeffectiveNovember2015.InDecember2015,theCompanydisposedoftheIllinoisRadioNetwork.29Item7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperationsThefollowingdiscussionshouldbereadinconjunctionwithItem1.Business,Item6.SelectedFinancialDataandtheconsolidatedfinancialstatementsandnotestheretoofSagaCommunications,Inc.anditssubsidiariescontainedelsewhereherein.Thefollowingdiscussionispresentedonbothaconsolidatedandsegmentbasis.Corporategeneralandadministrativeexpenses,interestexpense,write-offdebtissuancecosts,other(income)expense,andincometaxprovisionaremanagedonaconsolidatedbasisandarereflectedonlyinourdiscussionofconsolidatedresults.OnSeptember1,2017theCompanysolditsJoplin,MissouriandVictoria,Texastelevisionstations.Thehistoricalresultsofoperationsforthetelevisionstationsarepresentedinthediscontinuedoperationsforallperiodspresented(seeNote4).AsaresultoftheCompany’stelevisionstationsbeingreportedasdiscontinuedoperationstheCompanyonlyhasonereportablesegmentatDecember31,2019,2018and2017.Unlessindicatedotherwise,theinformationintheNotestoConsolidatedFinancialStatementsrelatestotheCompany’scontinuingoperations.Thediscussionofouroperatingperformancefocusesonoperatingincomebecausewemanageourstationsprimarilyonoperatingincome.Operatingperformanceisevaluatedforeachindividualmarket.WeusecertainfinancialmeasuresthatarenotcalculatedinaccordancewithgenerallyacceptedaccountingprinciplesintheUnitedStatesofAmerica(GAAP)toassessourfinancialperformance.Forexample,weevaluatetheperformanceofourmarketsbasedon“stationoperatingincome”(operatingincomepluscorporategeneralandadministrativeexpenses,depreciationandamortization,otheroperating(income)expenses,andimpairmentofintangibleassets).Stationoperatingincomeisgenerallyrecognizedbythebroadcastingindustryasameasureofperformance,isusedbyanalystswhoreportontheperformanceofthebroadcastingindustryanditservesasanindicatorofthemarketvalueofagroupofstations.Inaddition,weuseittoevaluateindividualstations,market-levelperformance,overalloperationsandasaprimarymeasureforincentivebasedcompensationofexecutivesandothermembersofmanagement.Stationoperatingincomeisnotnecessarilyindicativeofamountsthatmaybeavailabletousfordebtservicerequirements,othercommitments,reinvestmentorotherdiscretionaryuses.StationoperatingincomeisnotameasureofliquidityorofperformanceinaccordancewithGAAP,andshouldbeviewedasasupplementto,andnotasubstitutefor,ourresultsofoperationspresentedonaGAAPbasis.GeneralWeareabroadcastcompanyprimarilyengagedinacquiring,developingandoperatingbroadcastproperties.Weactivelyseekandexploreopportunitiesforexpansionthroughtheacquisitionofadditionalbroadcastproperties.Wereviewacquisitionopportunitiesonanongoingbasis.ContinuingOperations—RadioStationsOurradiostation’sprimarysourceofrevenueisfromthesaleofadvertisingforbroadcastonourstations.Dependingontheformatofaparticularradiostation,thereareapredeterminednumberofadvertisementsavailabletobebroadcasteachhour.Mostadvertisingcontractsareshort-termandgenerallyrunforafewweeksonly.Themajorityofourrevenueisgeneratedfromlocaladvertising,whichissoldprimarilybyeachradiomarkets’salesstaff.FortheyearsendedDecember31,2019,2018and2017,approximately88%,87%and88%,respectively,ofourradiostation’sgrossrevenuewasfromlocaladvertising.Togeneratenationaladvertisingsales,weengageindependentadvertisingsalesrepresentativefirmsthatspecializeinnationalsalesforeachofourbroadcastmarkets.Ourrevenuevariesthroughouttheyear.Advertisingexpenditures,ourprimarysourceofrevenue,generallyhavebeenlowestduringthewintermonths,whichincludethefirstquarterofeachyear.Politicalrevenuesignificantlydecreasedin2019and2017duetothedecreasednumberofnational,state,andlocalelectionsinmostofourmarketsascomparedto2018.Ournetoperatingrevenue,stationoperatingexpenseandoperatingincomevaryfrommarkettomarketbaseduponthemarket’srankorsizewhichisbaseduponpopulationandtheavailableradioadvertisingrevenueinthatparticularmarket.30Thebroadcastingindustryandadvertisingingeneral,isinfluencedbythestateoftheoveralleconomy,includingunemploymentrates,inflation,energypricesandconsumerinterestrates.Ourstationsbroadcastprimarilyinsmalltomidsizemarkets.Historically,thesemarketshavebeenmorestablethanmajormetropolitanmarketsduringdownturnsinadvertisingspending,butmaynotexperienceincreasesinsuchspendingassignificantasthoseinmajormetropolitanmarketsinperiodsofeconomicimprovement.Ourfinancialresultsaredependentonanumberoffactors,themostsignificantofwhichisourabilitytogenerateadvertisingrevenuethroughrateschargedtoadvertisers.Theratesastationisabletochargeare,inlargepart,basedonastation’sabilitytoattractaudiencesinthedemographicgroupstargetedbyitsadvertisers.Inanumberofourmarkets,thisismeasuredbyperiodicreportsgeneratedbyindependentnationalratingservices.Intheremainderofourmarketsitismeasuredbytheresultsadvertisersobtainthroughtheactualrunningofanadvertisingschedule.Advertisersmeasuretheseresultsbasedonincreaseddemandfortheirgoodsorservicesand/oractualrevenuesgeneratedfromsuchdemand.Variousfactorsaffecttherateastationcancharge,includingthegeneralstrengthofthelocalandnationaleconomies,populationgrowth,abilitytoprovidepopularprogramming,localmarketcompetition,targetmarketingcapabilityofradiocomparedtootheradvertisingmedia,andsignalstrength.Whenweacquireand/orbegintooperateastationorgroupofstationswegenerallyincreaseprogrammingandadvertisingandpromotionexpensestoincreaseourshareofourtargetdemographicaudience.Ourstrategysometimesrequireslevelsofspendingcommensuratewiththerevenuelevelsweplanonachievingintwotofiveyears.Duringperiodsofeconomicdownturns,orwhenthelevelofadvertisingspendingisflatordownacrosstheindustry,thisstrategymayresultintheappearancethatourcostofoperationsareincreasingatafasterratethanourgrowthinrevenues,untilsuchtimeasweachieveourtargetedlevelsofrevenuefortheacquiredstationorgroupofstations.Thenumberofadvertisementsthatcanbebroadcastwithoutjeopardizinglisteninglevels(andtheresultingratings)islimitedinpartbytheformatofaparticularradiostation.Ourstationsstrivetomaximizerevenuebyconstantlymanagingthenumberofcommercialsavailableforsaleandbyadjustingpricesbaseduponlocalmarketconditionsandratings.Whiletheremaybeshiftsfromtimetotimeinthenumberofadvertisementsbroadcastduringaparticulartimeoftheday,thetotalnumberofadvertisementsbroadcastonaparticularstationgenerallydoesnotvarysignificantlyfromyeartoyear.Anychangeinourrevenue,withtheexceptionofthoseinstanceswherestationsareacquiredorsold,isgenerallytheresultofinventoryselloutratiosandpricingadjustments,whicharemadetoensurethatthestationefficientlyutilizesavailableinventory.Ourradiostationsemployavarietyofprogrammingformats.Weperiodicallyperformmarketresearch,includingmusicevaluations,focusgroupsandstrategicvulnerabilitystudies.Becausereachingalargeanddemographicallyattractiveaudienceiscrucialtoastation’sfinancialsuccess,weendeavortodevelopstronglistenerloyalty.Ourstationsalsoemployaudiencepromotionstofurtherdevelopandsecurealoyalfollowing.Webelievethatthediversificationofformatsonourradiostationshelpstoinsulateusfromtheeffectsofchangesinmusicaltastesofthepubliconanyparticularformat.Theprimaryoperatingexpensesinvolvedinowningandoperatingradiostationsareemployeesalaries,salescommissions,programmingexpenses,depreciation,andadvertisingandpromotionexpenses.Theradiobroadcastingindustryissubjecttorapidtechnologicalchange,evolvingindustrystandardsandtheemergenceofnewmediatechnologiesandservices.Thesenewtechnologiesandmediaaregainingadvertisingshareagainstradioandothertraditionalmedia.Wearecontinuingtoexpandourdigitalinitiativetoprovideaseamlessexperienceacrossmultipleplatforms.Ourgoalistoallowourlistenerstoconnectwithourbrandsondemandwherever,however,andwhenevertheychoose.Wecontinuetocreateopportunitiesthroughtargeteddigitaladvertisingandanarrayofdigitalservicesthatincludeonlinepromotions,mobilemessaging,andemailmarketing.DuringtheyearsendedDecember31,2019,2018and2017,ourColumbus,Ohio;DesMoines,Iowa;Manchester,NewHampshire;Milwaukee,WisconsinandNorfolk,Virginiamarkets,whencombined,representedapproximately39%,41%,and41%,respectively,ofourconsolidatednetoperatingrevenue.Anadversechangeinanyoftheseradiomarketsorrelativemarketpositioninthosemarketscouldhaveasignificantimpactonouroperatingresultsasawhole.31Thefollowingtablesdescribethepercentageofourconsolidatednetoperatingrevenuerepresentedbyeachofthesemarkets:PercentageofConsolidatedNetOperatingRevenuefortheYearsEndedDecember31,201920182017Market:Columbus,Ohio...............................................11%11%11%DesMoines,Iowa..............................................6%7%7%Manchester,NewHampshire.......................................5%5%5%Milwaukee,Wisconsin...........................................11%12%12%Norfolk,Virginia...............................................6%6%6%DuringtheyearsendedDecember31,2019,2018and2017,theradiostationsinourfivelargestmarketswhencombined,representedapproximately45%,48%and48%,respectively,ofourconsolidatedstationoperatingincome.Thefollowingtablesdescribethepercentageofourconsolidatedstationoperatingincomerepresentedbyeachofthesemarkets:PercentageofConsolidatedStationOperatingIncome(*)fortheYearsEndedDecember31,201920182017Market:Columbus,Ohio...............................................15%16%15%DesMoines,Iowa..............................................6%6%7%Manchester,NewHampshire.......................................6%6%6%Milwaukee,Wisconsin...........................................12%14%14%Norfolk,Virginia...............................................6%6%6%(*)Operatingincomepluscorporategeneralandadministrativeexpenses,depreciationandamortization,otheroperating(income)expenses,andimpairmentofintangibleassets.DiscontinuedOperations—TelevisionStationsWesoldourtelevisionstationsonSeptember1,2017.Allhistoricalresultsofoperationsforthetelevisionstationsarereportedinthediscontinuedoperationsforallperiodspresented.Ourtelevisionstation’sprimarysourceofrevenuewasfromthesaleofadvertisingforbroadcastonourstations.Thenumberofadvertisementsavailableforbroadcastonourtelevisionstationswerelimitedbynetworkaffiliationandsyndicatedprogrammingagreementsand,withrespecttochildren’sprograms,federalregulation.Ourtelevisionstations’localmarketmanagersdeterminedthenumberofadvertisementstobebroadcastinlocallyproducedprogramsonly,whichwereprimarilynewsprogrammingandoccasionallylocalsportsorinformationshows.Ournetoperatingrevenue,stationoperatingexpenseandoperatingincomevaryfrommarkettomarketbaseduponthemarket’srankorsize,whichwasbaseduponpopulation,availabletelevisionadvertisingrevenueinthatparticularmarket,andthepopularityofprogrammingbeingbroadcast.Ourfinancialresultsweredependentonanumberoffactors,themostsignificantofwhichwasourabilitytogenerateadvertisingrevenuethroughrateschargedtoadvertisers.Theratesastationwasabletochargewere,inlargepart,basedonastation’sabilitytoattractaudiencesinthedemographicgroupstargeted32byitsadvertisers,asmeasuredprincipallybyperiodicreportsbyindependentnationalratingservices.Variousfactorsaffecttherateastationcancharge,includingthegeneralstrengthofthelocalandnationaleconomies,populationgrowth,abilitytoprovidepopularprogrammingthroughlocallyproducednews,sportsandweatherandasaresultofsyndicationandnetworkaffiliationagreements,localmarketcompetition,theabilityoftelevisionbroadcastingtoreachamassappealmarketcomparedtootheradvertisingmedia,andsignalstrengthincludingcable/satellitecoverage,andgovernmentregulationandpolicies.Ourstationsstrivedtomaximizerevenuebyconstantlyadjustingpricesforourcommercialspotsbaseduponlocalmarketconditions,advertisingdemandsandratings.Whiletheremayhavebeenshiftsfromtimetotimeinthenumberofadvertisementsbroadcastduringaparticulartimeofday,thetotalnumberofadvertisementsbroadcastonastationgenerallydidnotvarysignificantlyfromyeartoyear.Anychangeinourrevenue,withtheexceptionofthoseinstanceswherestationswereacquiredorsold,wasgenerallytheresultofpricingadjustments,whichweremadetoensurethatthestationefficientlyutilizedavailableinventory.Becauseaudienceratingsinthelocalmarketarecrucialtoastation’sfinancialsuccess,weendeavoredtodevelopstrongviewerloyaltybyprovidinglocallyproducednews,weatherandsportsprogramming.Webelievethatthisemphasisonthelocalmarketprovideduswiththeviewerloyaltyweweretryingtoachieve.Mostofourrevenuewasgeneratedfromlocaladvertising,whichwassoldprimarilybyeachtelevisionmarkets’salesstaff.Forthe8monthsendedAugust31,2017approximately83%,ofourtelevisionsegment’sgrossrevenuewasfromlocaladvertising.Togeneratenationaladvertisingsales,weengagedindependentadvertisingsalesrepresentativesthatspecializeinnationalsalesforeachofourtelevisionmarkets.Ourrevenuevariesthroughouttheyear.Advertisingexpenditures,ourprimarysourceofrevenue,generallyhavebeenlowestduringthewintermonths,whichincludethefirstquarterofeachyear.Politicalrevenuesignificantlydecreasedin2017duetotheincreasednumberofnational,state,andlocalelectionsinmostofourmarketsascomparedtothepreviousyear.Theprimaryoperatingexpensesinvolvedinowningandoperatingtelevisionstationswereemployeesalaries,salescommissions,programmingexpenses,includingnewsproductionandthecostofacquiringcertainsyndicatedprogramming,depreciation,andadvertisingandpromotionexpenses.33ResultsofOperationsThefollowingtablessummarizeourresultsofoperationsforthethreeyearsendedDecember31,2019,2018and2017.ConsolidatedResultsofOperations2019vs.20182018vs.2017YearsEndedDecember31,$Increase(Decrease)%Increase(Decrease)$Increase(Decrease)%Increase(Decrease)201920182017(Inthousands,except%’sandpershareinformation)Netoperatingrevenue................$123,072$124,829$118,149$(1,757)(1.4)%$6,6805.7%Stationoperatingexpense..............92,69293,72787,759(1,035)(1.1)%5,9686.8%CorporateG&A...................11,46011,35911,6571010.9%(298)(2.6)%Otheroperatingexpense(income),net......112615551N/M6N/MImpairmentofintangibleassets..........——1,449——(1,449)N/MOperatingincomefromcontinuingoperations.18,80819,68217,229(874)(4.4)%2,45314.2%Interestexpense....................735946903(211)(22.3)%434.8%Interest(income)...................(610)(631)—21(3.3)%(631)N/MOther(income)expense...............(16)(23)—7N/M(23)N/MIncomefromcontinuingoperationsbeforetaxes.........................18,69919,39016,326(691)(3.6)%3,06418.8%Incometaxexpense(benefit)............5,4205,700(5,920)(280)(4.9)%11,620N/MIncomefromcontinuingoperations,netoftax..........................13,27913,69022,246(411)(3.0)%(8,556)(38.5)%Incomefromdiscontinuedoperations,netoftax..........................——32,471——(32,471)N/MNetincome.......................$13,279$13,690$54,717$(411)(3.0)%$(41,027)N/MEarningspershare:Fromcontinuingoperations............$2.23$2.30$3.77$(0.07)(3.0)%$(1.47)39.0%Fromdiscontinuedoperations...........——5.50——(5.50)N/MEarningspershare(diluted)............$2.23$2.30$9.27$(0.07)(3.0)%$(6.97)N/MResultsofDiscontinuedOperations2019vs.20182018vs.2017YearsEndedDecember31,$Increase(Decrease)%Increase(Decrease)$Increase(Decrease)%Increase(Decrease)201920182017(1)(Inthousands,except%’sandpershareinformation)Netoperatingrevenue................$—$—$14,238$——$(14,238)N/MStationoperatingexpense.............——9,757——(9,757)N/MOtheroperatingexpense(income)........——31——(31)N/MOperatingincomefromdiscontinuedoperations......................——4,450——(4,450)N/MInterestexpense....................——21——(21)N/MOtherincome.....................———————Incomebeforeincometaxesfromdiscontinuedoperations......................——4,429——(4,429)N/MPretaxgainonthedisposalofdiscontinuedoperations......................——50,842——(50,842)N/MTotalpretaxgainondiscontinuedoperations.——55,271——(55,271)N/MIncometaxexpense.................——22,800——(22,800)N/MIncomefromdiscontinuedoperations......$—$—$32,471$——$(32,471)N/M(1)ResultsofoperationsfortheTelevisionstationsarereflectedthroughAugust31,2017.TheeffectivedateofthesalewasSeptember1,2017.N/M=NotMeaningful34YearEndedDecember31,2019ComparedtoYearEndedDecember31,2018FortheyearendedDecember31,2019,consolidatednetoperatingrevenuewas$123,072,000comparedwith$124,829,000fortheyearendedDecember31,2018,adecreaseof$1,757,000or1.4%.Wehadanincreaseofapproximately$4,210,000thatwasattributabletostationsthatwedidnotownoroperatefortheentirecomparableperiod,andadecreaseof$5,967,000generatedbystationsweownedoroperatedforthecomparableperiodin2018(“samestation”).Thedecreaseinsamestationrevenuewasprimarilytheresultofdecreasesingrosslocalrevenueof$3,373,000,grosspoliticalrevenueof$1,987,000andgrossnationalrevenueof$1,321,000from2018partiallyoffsetbyanincreaseingrossnon-spotrevenueof$649,000andadecreaseinagencycommissionsof$645,000.ThedecreaseingrosslocalrevenueisduetodecreasesinourBrattleboro,Vermont;Champaign,Illinois;Charlottesville,Virginia;andDesMoines,Iowamarkets.Thedecreaseingrosspoliticalrevenuewasduetoalowernumberofnational,stateandlocalelectionsinourBellingham,Washington;Columbus,Ohio;andMilwaukee,Wisconsinmarkets.ThedecreaseingrossnationalrevenueisduetodecreasesinourChampaign,Illinois;Charleston,SouthCarolina;Milwaukee,WisconsinandNorfolk,Virginiamarkets.Theincreaseingrossnon-spotrevenueisduetoincreasesinourChampaign,Illinois;Columbus,Ohio;andIthaca,NewYorkmarkets.Thedecreaseinagencycommissionswasduetolowerlocalagencyrevenue.Stationoperatingexpensewas$92,692,000fortheyearendedDecember31,2019,comparedwith$93,727,000fortheyearendedDecember31,2018,adecreaseof$1,035,000or1.1%.Wehadanincreaseofapproximately$3,653,000thatwasattributabletostationsthatwedidnotownoroperatefortheentirecomparableperiod,andadecreaseofapproximately$4,688,000generatedbystationsweownedoroperatedforthecomparableperiodin2018.Thedecreaseisprimarilyattributabletoadecreaseinhealthcarecostsof$1,358,000,adecreasecompensationrelatedcostsof$1,121,000,adecreaseinlocalcommissionexpenseof$758,000,adecreaseinamortizationexpensesof$402,000relatedtointangibleassets,adecreaseof$267,000innationalrepcommissions,adecreaseintradeexpenseof$266,000andadecreaseof$201,000inmusiclicensefees.OperatingincomefortheyearendedDecember31,2019was$18,808,000comparedto$19,682,000fortheyearendedDecember31,2018,adecreaseof$874,000or4.4%.Thedecreasewasaresultofthedecreaseinnetoperatingrevenuepartiallyoffsetbythedecreaseinstationoperatingexpense,describedabove,anincreaseinourcorporategeneralandadministrativeexpensesof$101,000orlessthan1%,andanincreaseinotheroperatingexpenseof$51,000from2018.Wegeneratednetincomeof$13,279,000($2.23pershareonafullydilutedbasis)duringtheyearendedDecember31,2019,comparedto$13,690,000($2.30pershareonafullydilutedbasis)fortheyearendedDecember31,2018,adecreaseof$411,000or3%.Thedecreaseinnetincomeisduetothedecreaseofoperatingincome,describedabove,adecreaseininterestincomeof$21,000,andadecreaseinotherincomeof$7,000offsetbyadecreaseinincometaxesof$280,000andadecreaseininterestexpenseof$211,000.Thedecreaseininterestexpenseisduetothedecreaseinourdebtoutstandingpartiallyoffsetbyanincreaseinourinterestrates.YearEndedDecember31,2018ComparedtoYearEndedDecember31,2017FortheyearendedDecember31,2018,consolidatednetoperatingrevenuewas$124,829,000comparedwith$118,149,000fortheyearendedDecember31,2017,anincreaseof$6,680,000or5.7%.Wehadanincreaseofapproximately$5,440,000thatwasattributabletostationsthatwedidnotownoroperatefortheentirecomparableperiod,andanincreaseof$1,240,000generatedbystationsweownedoroperatedforthecomparableperiodin2017(“samestation”).Theincreaseinsamestationrevenuewasprimarilytheresultofincreasesingrossnationalrevenueof$1,321,000,grosspoliticalrevenueof$1,279,000,andgrossnon-spotrevenueof$458,000from2017partiallyoffsetbyadecreaseingrosslocalrevenueof$1,811,000.TheincreaseingrossnationalrevenueisduetoincreasesinourChampaign,Illinois;Manchester,NewHampshire;Milwaukee,WisconsinandNorfolk,Virginiamarkets.Theincreaseingrosspoliticalrevenuewasduetoahighernumberofnational,stateandlocalelectionsinmostofourmarkets.Theincreaseingrossnon-spotrevenueisduetoincreasesinourIthaca,NewYorkandYankton,SouthDakotamarkets.ThedecreaseingrosslocalrevenuewasduetodecreasesinourChampaign,Illinois;DesMoines,Iowa;Harrisonburg,Virginia;Jonesboro,Arkansas;Northampton,MassachusettsandSpringfield,Massachusettsmarkets.35Stationoperatingexpensewas$93,727,000fortheyearendedDecember31,2018,comparedwith$87,759,000fortheyearendedDecember31,2017,anincreaseof$5,968,000or6.8%.Wehadanincreaseofapproximately$5,326,000thatwasattributabletostationsthatwedidnotownoroperatefortheentirecomparableperiod,andanincreaseofapproximately$642,000generatedbystationsweownedoroperatedforthecomparableperiodin2017.Theincreaseisprimarilyattributabletoanincreaseinhealthcarecostsof$365,000andanincreaseinmusiclicensingfeesof$283,000relatedtoacreditwereceivedinthethirdquarterof2017resultingfromSESACarbitration.OperatingincomefortheyearendedDecember31,2018was$19,682,000comparedto$17,229,000fortheyearendedDecember31,2017,anincreaseof$2,453,000or14.2%.Theincreasewasaresultoftheincreaseinnetoperatingrevenuepartiallyoffsetbytheincreaseinstationoperatingexpense,describedabove,adecreaseinourcorporategeneralandadministrativeexpensesof$298,000or2.6%,anincreaseinotheroperatingexpenseof$6,000from2017andanimpairmentchargeof$1,449,000in2017.Thedecreaseincorporateexpensesisduetoadecreaseinkeymanlifeinsuranceof$220,000,andadecreaseof$100,000incompensationcosts.Incomefromcontinuingoperations,netoftaxfortheyearendedDecember31,2018was$13,690,000comparedto$22,246,000fortheyearendedDecember31,2017,adecreaseof$8,556,000or38.5%.Thedecreaseinincomefromcontinuingoperations,netoftaxisprimarilyduetotheincometaxbenefitofapproximately$11.5millionin2017duetoadecreaseinthedeferredtaxrateforfederalincometaxfrom35%to21%asaresultoftheTaxCutsandJobsAct,partiallyoffsetbytheincreaseinoperatingincomein2018,describedabove,anincreaseininterestexpenseof$43,000duetoanincreaseinourinterestrates,anincreaseininterestincomeof$631,000andanincreaseinotherincomeof$23,000.SeeNote7ofthefinancialstatementsformoreinformationontheimpactoftheTaxCutsandJobsAct.Theincreaseininterestincomeisattributabletoanincreaseininterestanddividendincomeearnedoncashandcashequivalents.TheincreaseinotherincomeisduetoinsuranceproceedsresultingfromdamagetotheroofofourbuildinginourBellingham,Washingtonmarket.Wegeneratednetincomeof$13,690,000($2.30pershareonafullydilutedbasis)duringtheyearendedDecember31,2018,comparedto$54,717,000($9.27pershareonafullydilutedbasis)fortheyearendedDecember31,2017,adecreaseof$41,027,000.Thisisadirectresultofthedecreaseinincomefromcontinuingoperations,netoftaxof$8,556,000andadecreaseinincomefromdiscontinuedoperations,netoftaxof$32,471,000duetothesaleofthetelevisionstationsinSeptember2017andtherelatedgainrecognizedonthesale.LiquidityandCapitalResourcesDebtArrangementsandDebtServiceRequirementsOnAugust18,2015,weenteredintoanewcreditfacility(the“CreditFacility”)withJPMorganChaseBank,N.A.,TheHuntingtonNationalBank,CitizensBank,NationalAssociationandJ.P.MorganSecuritiesLLC.InconnectionwiththeexecutionoftheCreditFacility,thecreditagreementinplaceatJune30,2015(the“OldCreditAgreement”)wasterminated,andalloutstandingamountswerepaidinfull.TheCreditFacilityconsistsofa$100millionfive-yearrevolvingfacility(the“RevolvingCreditFacility”)andinitiallymaturedonAugust18,2020.OnJune27,2018,weenteredintoaSecondAmendmenttoourCreditFacility,whichhadfirstbeenamendedonSeptember1,2017,extendingtherevolvingcreditmaturitydateundertheCreditAgreementforfiveyearsafterthedateoftheamendmenttoJune27,2023.OnJuly1,2019,weelectedtoreduceourRevolvingCreditFacilityto$70million.Wehavepledgedsubstantiallyallofourassets(excludingourFCClicensesandcertainotherassets)insupportoftheCreditFacilityandeachofoursubsidiarieshasguaranteedtheCreditFacilityandhaspledgedsubstantiallyalloftheirassets(excludingtheirFCClicensesandcertainotherassets)insupportoftheCreditFacility.Approximately$266,000ofdebtissuancecostsrelatedtotheCreditFacilitywerecapitalizedandarebeingamortizedoverthelifeoftheCreditFacility.Thesedebtissuancecostsareincludedinotherassets,netintheconsolidatedbalancesheets.AsaresultoftheSecondAmendment,theCompanyincurredan36additional$120,000oftransactionfeesrelatedtotheCreditFacilitythatwerecapitalized.ThecumulativetransactionfeesarebeingamortizedovertheremaininglifeoftheCreditFacility.InterestratesundertheCreditFacilityarepayable,atouroption,atalternativesequaltoLIBOR(1.75%atDecember31,2019),plus1%to2%orthebaserateplus0%to1%.ThespreadoverLIBORandthebaseratevaryfromtimetotime,dependinguponourfinancialleverage.LetterofcreditissuedundertheCreditFacilitywillbesubjecttoaparticipationfee(whichisequaltotheinterestratesapplicabletoEurocurrencyLoans,asdefinedintheCreditAgreement)payabletoeachoftheLendersandafrontingfeeequalto0.25%perannumpayabletotheissuingbank.Wealsopayquarterlycommitmentfeesof0.2%to0.3%perannumontheunusedportionoftheRevolvingCreditFacility.TheCreditFacilitycontainsanumberoffinancialcovenants(allofwhichwewereincompliancewithatDecember31,2019)which,amongotherthings,requireustomaintainspecifiedfinancialratiosandimposecertainlimitationsonuswithrespecttoinvestments,additionalindebtedness,dividends,distributions,guarantees,liensandencumbrances.OnJune7,2019,weused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofourRevolvingCreditFacility.OnFebruary4,2019,weused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofourRevolvingCreditFacilityanditispresentedincurrentportionoflong-termdebtinourbalancesheetatDecember31,2018.OnSeptember4,2018,weused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofourRevolvingCreditFacility.Wehadapproximately$60millionofunusedborrowingcapacityundertheRevolvingCreditFacilityatDecember31,2019.SourcesandUsesofCashDuringtheyearsendedDecember31,2019,2018and2017,wehadnetcashflowsfromoperatingactivitiesfromcontinuingoperationsof$25,335,000,$25,559,000and$23,912,000,respectively.WebelievethatcashflowfromoperationswillbesufficienttomeetquarterlydebtservicerequirementsforinterestandscheduledpaymentsofprincipalundertheCreditFacility.However,ifsuchcashflowisnotsufficient,wemayberequiredtoselladditionalequitysecurities,refinanceourobligationsordisposeofoneormoreofourpropertiesinordertomakesuchscheduledpayments.Therecanbenoassurancethatwewouldbeabletoeffectanysuchtransactionsonfavorableterms,ifatall.InMarch2013,ourboardofdirectorsauthorizedanincreasetoourStockBuy-BackProgram(the“Buy-BackProgram”)toallowustopurchaseupto$75.8millionofourClassACommonStock.Fromitsinceptionin1998throughDecember31,2019,wehaverepurchased2.1millionsharesofourClassACommonStockfor$56.5million.DuringtheyearendedDecember31,2019,approximately21,000shareswererepurchasedfor$606,000underourstockbuy-backprogramand19,000shareswereretainedforpaymentofwithholdingtaxesfor$566,000relatedtothevestingofrestrictedstock.Ourcapitalexpenditures,exclusiveofacquisitions,fortheyearendedDecember31,2019were$5,732,000($5,922,000in2018).Weanticipatecapitalexpendituresin2020tobeapproximately$5.0millionto$5.5million,whichweexpecttofinancethroughfundsgeneratedfromoperations.OnJanuary9,2019,theCompanyclosedonanagreementtopurchaseWPVQ-AMandW222CHfromCountyBroadcastingCompany,LLCforanaggregatepurchasepriceof$210thousandusingfundsgeneratedfromoperations.ManagementattributesthegoodwillrecognizedintheacquisitiontothepoweroftheexistingbrandsintheGreenfield,MassachusettsmarketaswellassynergiesandgrowthopportunitiesexpectedthroughthecombinationwiththeCompany’sexistingstations.OnOctober29,2018,theCompanyenteredintoanagreementtopurchaseWOGK-FM,WNDT-FM,WNDD-FMandWNDN-FM,fromOcalaBroadcastingCorporation.TheCompanyclosedthistransactioneffectiveDecember31,2018usingfundsgeneratedfromoperationsof$9.84million,whichincludedthe37purchasepriceof$9.3million,thepurchaseof$566thousandinaccountsreceivablebycertainclosingadjustmentsandtransactionalcostsofapproximately$25thousand,ofwhich$553thousandwaspaidinJanuary2019.OnMay9,2017weenteredintoadefinitiveagreementtosellourJoplin,MissouriandVictoria,Texastelevisionstationsforapproximately$66.6million,subjecttocertainadjustments,toEveningTelegramCompanyd/b/aMorganMurphyMedia(the“TelevisionSale”).TheTelevisionSalewascompletedonSeptember1,2017andtheCompanyreceivednetproceedsof$69.5millionwhichincludedthesalespriceof$66.6million,thesalesofaccountsreceivableofapproximately$3.4million,offsetbycertainclosingadjustmentsandtransactionalcostsof$500thousand.TheCompanyrecognizedapretaxgainof$50.8millionasaresultoftheTelevisionSaleinthethirdquarterof2017.ThegainnetoftaxfortheTelevisionSalewas$29.9million.EffectiveSeptember1,2017,theCompanyused$24.2millionoftheproceedsfromtheTelevisionSaletofinancetheacquisitionofradiostationsinSouthCarolina(asdescribedinNote10).OnOctober5,2017andNovember3,2017,theCompanyused$5,287,000and$5,000,000,respectivelyoftheproceedsfromtheTelevisionSaletopaydownaportionofitsRevolvingCreditFacility(asdefinedanddescribedinNote5).OnMay9,2017,theCompanyenteredintoanAssetPurchaseAgreementwithApexMediaCorporationandPearceDevelopment,LLCf/k/aApexRealProperty,LLCtopurchase,forapproximately$23million(subjecttocertainpurchasepriceadjustments)plustherighttoaircertainradiocommercials,substantiallyalltheassetsrelatedtotheoperationofthefollowingradiostationsprincipallyservingtheSouthCarolinaarea:WCKN(FM),WMXF(FM),WXST(FM),WAVF(FM),WSPO(AM),W261DG,W257BQ,WVSC(FM),WLHH(FM),WOEZ(FM),W256CB,W293BZ.TheCompanyclosedthistransactioneffectiveSeptember1,2017,simultaneouslywiththeclosingoftheTelevisionSaleusingfundsgeneratedfromtheTelevisionSale.OnJanuary16,2017,weenteredintoanassetpurchaseagreementtopurchaseanFMradiostation(WCVL)fromWUVA,Incorporated,servingtheCharlottesville,Virginiamarketforapproximately$1,650,000.Simultaneously,weenteredintoaTBAtobeginoperatingthestationonFebruary1,2017.WecompletedthisacquisitiononApril18,2017.Thisacquisitionwasfinancedthroughfundsgeneratedfromoperations.OnMarch4,2020,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.32pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.9million,willbepaidonApril10,2020toshareholdersofrecordonMarch16,2020.OnDecember11,2019,theCompany’sBoardofDirectorsdeclaredaquarterlycashdividendof$0.30pershareonitsClassesAandBshares.Thisdividendtotalingapproximately$1.8millionwaspaidonJanuary17,2020toshareholdersofrecordonDecember27,2019andfundedbycashontheCompany’sbalancesheet.OnSeptember12,2019,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonOctober11,2019toshareholdersofrecordonSeptember23,2019andfundedbycashontheCompany’sbalancesheet.OnMay30,2019,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonJuly5,2019toshareholdersofrecordonJune14,2019andfundedbycashontheCompany’sbalancesheet.OnFebruary26,2019,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonMarch29,2019toshareholdersofrecordonMarch12,2019andfundedbycashontheCompany’sbalancesheet.OnJune7,2019,theCompanyused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofitsRevolvingCreditFacility.38OnFebruary4,2019,theCompanyused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofitsRevolvingCreditFacilityanditispresentedincurrentportionoflong-termdebtinourbalancesheetatDecember31,2018.Wecontinuetoactivelyseekandexploreopportunitiesforexpansionthroughtheacquisitionsofadditionalbroadcastproperties.Weanticipatethatanyfutureacquisitionsofradioandtelevisionstationsanddividendpaymentswillbefinancedthroughfundsgeneratedfromoperations,borrowingsundertheCreditAgreement,additionaldebtorequityfinancing,oracombinationthereof.However,therecanbenoassurancesthatanysuchfinancingwillbeavailableonacceptableterms,ifatall.SummaryDisclosuresAboutContractualObligationsWehavefuturecashobligationsundervarioustypesofcontracts,includingthetermsofourCreditFacility,operatingleases,programmingcontracts,employmentagreements,andotheroperatingcontracts.ThefollowingtablereflectsasummaryofourcontractualcashobligationsandothercommercialcommitmentsasofDecember31,2019:PaymentsDueByPeriodContractualObligations:TotalLessThan1Year1to3Years4to5YearsMoreThan5Years(Inthousands)Long-TermDebtObligations(1).....$10,000$—$—$10,000$—InterestPaymentsonLong-TermDebt(2)....................1,404403805196—OperatingLeases..............8,1931,6893,0911,9091,504PurchaseObligations(3)...........33,13713,75011,3406,6111,436OtherLong-TermLiabilities.......—————TotalContractualCashObligations..$52,734$15,842$15,236$18,716$2,940(1)UnderourCreditFacility,thematurityonoutstandingdebtof$10millioncouldbeacceleratedifwedonotmaintaincertaincovenants.(SeeNote5oftheNotestoConsolidatedFinancialStatements).(2)Interestpaymentsonthelong-termdebtarebasedonscheduleddebtmaturitiesandtheinterestratesareheldconstantovertheremainingterms.(3)Includes$21,721,000inobligationsunderemploymentagreementsandcontractswithon-airpersonalities,otheremployees,andourPresident,CEO,andChairman,EdwardK.Christian.WeanticipatethattheabovecontractualcashobligationswillbefinancedthroughfundsgeneratedfromoperationsoradditionalborrowingsunderourCreditFacility,oracombinationthereof.CriticalAccountingPoliciesandEstimatesOurconsolidatedfinancialstatementshavebeenpreparedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStates,whichrequireustomakeestimates,judgmentsandassumptionsthataffectthereportedamountsofcertainassets,liabilities,revenues,expensesandrelateddisclosuresandcontingencies.Weevaluateestimatesusedinpreparationofourfinancialstatementsonacontinualbasis,includingestimatesrelatedtothefollowing:RevenueRecognition:Revenuefromthesaleofcommercialbroadcasttimetoadvertisersisrecognizedwhencommercialsarebroadcast.Revenueisreportednetofadvertisingagencycommissions.Agencycommissions,whenapplicable,arebasedonastatedpercentageappliedtogrossbilling.AllrevenueisrecognizedinaccordancewiththeSecuritiesandExchangeCommission’s(“SEC”)StaffAccountingBulletin(“SAB”)No.104,Topic13,RevenueRecognitionRevisedandUpdatedandtheAccountingStandardsCodification(ASC)Topic606,RevenuefromContractswithCustomers.39CarryingValueofAccountsReceivableandRelatedAllowanceforDoubtfulAccounts:Weevaluatethecollectabilityofouraccountsreceivablebasedonacombinationoffactors.Incircumstanceswhereweareawareofaspecificcustomer’sinabilitytomeetitsfinancialobligationstous(e.g.,bankruptcyfilings,credithistory,etc.),werecordaspecificreserveforbaddebtsagainstamountsduetoreducethenetrecognizedreceivabletotheamountwereasonablybelievewillbecollected.Forallothercustomers,werecognizereservesforbaddebtsbasedonpastlosshistoryandthelengthoftimethereceivablesarepastdue,rangingfrom50%foramounts90daysoutstandingto100%foramountsover120daysoutstanding.Ifourevaluationsofthecollectabilityofouraccountsreceivabledifferfromactualresults,additionalbaddebtexpenseandallowancesmayberequired.Ourhistoricalestimateshavebeenareliablemethodtoestimatefutureallowancesandourreserveshaveaveragedapproximately2-4%ofouroutstandingreceivables.Theeffectofanincreaseinourallowanceof1%ofouroutstandingreceivablesasofDecember31,2019,from3.7%to4.7%orfrom$671,000to$845,000wouldresultinadecreaseinnetincomeof$128,000,netoftaxesfortheyearendedDecember31,2019.PurchaseAccounting:Weaccountforouracquisitionsunderthepurchasemethodofaccounting.Thetotalcostofacquisitionsisallocatedtotheunderlyingnetassets,basedontheirrespectiveestimatedfairvaluesasoftheacquisitiondate.Theexcessofconsiderationpaidovertheestimatedfairvaluesofthenetassetsacquiredisrecordedasgoodwill.Determiningthefairvaluesofthenetassetsacquiredandliabilitiesassumedrequiresmanagement’sjudgmentandofteninvolvestheuseofsignificantestimatesincludingassumptionswithrespecttofuturecashinflowsandoutflows,discountrates,assetlivesandmarketmultiples,amongotheritems.BroadcastLicensesandGoodwill:AsofDecember31,2019,wehaverecordedapproximately$95,311,000inbroadcastlicensesand$18,963,000ingoodwill,whichrepresents45.3%ofourtotalassets.Inassessingtherecoverabilityoftheseassets,wemustconductimpairmenttestingandchargetooperationsanimpairmentexpenseonlyintheperiodsinwhichthecarryingvalueoftheseassetsismorethantheirfairvalue.WeperformanannualimpairmenttestonOctober1ofeachyear.Therewasnoimpairmentofbroadcastlicensesin2019or2018.Duringthefourthquarterof2017,werecognizeda$1,449,000impairmentchargeforbroadcastlicensesprimarilyduetoadeclineinavailablemarketrevenue,marketrevenueshare,profitmarginsandestimatedlong-termgrowthratesinourSpringfield,Illinoismarket.Therewerenoimpairmentindicatorsforgoodwill.PleaserefertoNote3—BroadcastLicenses,GoodwillandOtherIntangibleAssets,intheaccompanyingnotestotheconsolidatedfinancialstatementsforadiscussionofseveralkeyassumptionsusedinthefairvalueestimateofourbroadcastlicensesduringourfourthquarterannualimpairmenttest.Webelieveourestimateofthevalueofourbroadcastlicensesisacriticalaccountingestimateasthevalueissignificantinrelationtoourtotalassets,andourestimateofthevalueusesassumptionsthatincorporatevariablesbasedonpastexperiencesandjudgmentsaboutfutureoperatingperformanceofourstations.Thesevariablesincludebutarenotlimitedto:(1)theforecastgrowthrateofeachradioandtelevisionmarket,includingpopulation,householdincome,retailsalesandotherexpendituresthatwouldinfluenceadvertisingexpenditures;(2)marketshareandprofitmarginofanaveragestationwithinamarket;(3)estimatedcapitalstart-upcostsandlossesincurredduringtheearlyyears;(4)risk-adjusteddiscountrate;(5)thelikelymediacompetitionwithinthemarketarea;and(6)terminalvalues.Changesinourestimatesofthefairvalueoftheseassetscouldresultinmaterialfutureperiodwrite-downsinthecarryingvalueofourbroadcastlicenses.Forillustrativepurposesonly,hadthefairvaluesofeachofourbroadcastinglicensesbeenlowerby10%asofDecember31,2019,wewouldhaverecordedanadditionalbroadcastlicenseimpairmentofapproximately$1.8million;hadthefairvaluesofeachofourbroadcastinglicensesbeenlowerby20%asofDecember31,2019,wewouldhaverecordedanadditionalbroadcastlicenseimpairmentofapproximately$6.1million;andhadthefairvalueofourbroadcastinglicensesbeenlowerby30%asofDecember31,2019,wewouldhaverecordedanadditionalbroadcastlicenseimpairmentofapproximately$12.4million.StockBasedCompensation:WeuseaBlack-Scholesvaluationmodeltoestimatethefairvalueofstockoptionawards.Underthefairvaluemethod,stockbasedcompensationcostismeasuredatthegrantdatebasedonthefairvalueoftheawardandisrecognizedasexpenseonastraight-linebasisoverthevestingperiod.Determiningthefairvalueofshare-basedawardsatgrantdaterequiresassumptionsandjudgments40aboutexpectedvolatilityandforfeiturerates,amongotherfactors.Ifactualresultsdiffersignificantlyfromtheseassumptions,thenstockbasedcompensationexpensemaydiffermateriallyinthefuturefromthatpreviouslyrecorded.ThefairvalueofrestrictedstockawardsisdeterminedbasedontheclosingmarketpriceoftheCompany’sClassACommonStockonthegrantdateandisadjustedateachreportingdatebasedontheamountofsharesultimatelyexpectedtovest.WehadnostockoptionsoutstandingatDecember31,2019or2018.LitigationandContingencies:Onanongoingbasis,weevaluateourexposurerelatedtolitigationandcontingenciesandrecordaliabilitywhenavailableinformationindicatesthataliabilityisprobableandestimable.Wealsodisclosesignificantmattersthatarereasonablypossibletoresultinalossorareprobablebutnotestimable.MarketRiskandRiskManagementPoliciesOurearningsareaffectedbychangesinshort-terminterestratesasaresultofourlong-termdebtarrangements.Ifmarketinterestratesaveraged1%morein2019thantheydidduring2019,ourinterestexpensewouldincrease,andincomebeforetaxeswoulddecreaseby$126,000.Theseamountsaredeterminedbyconsideringtheimpactofthehypotheticalinterestratesonourborrowingcost.Thisanalysisdoesnotconsidertheeffectsofthereducedlevelofoveralleconomicactivitythatcouldexistinsuchanenvironment.Further,intheeventofachangeofsuchmagnitude,managementwouldlikelytakeactionstofurthermitigateitsexposuretothechange.However,duetotheuncertaintyofthespecificactionsthatwouldbetakenandtheirpossibleeffects,thesensitivityanalysisassumesnochangesinourfinancialstructure.InflationTheimpactofinflationonouroperationshasnotbeensignificanttodate.Therecanbenoassurancethatahighrateofinflationinthefuturewouldnothaveanadverseeffectonouroperations.RecentAccountingPronouncementsRecentaccountingpronouncementsaredescribedinNote1totheaccompanyingfinancialstatements.Item7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk.Informationappearingunderthecaption“MarketRiskandRiskManagementPolicies”inItem7isherebyincorporatedbyreference.Item8.FinancialStatementsandSupplementaryDataThefinancialstatementsattachedheretoarefiledaspartofthisannualreport.Item9.ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosureNone.Item9A.ControlsandProceduresEvaluationofDisclosureControlsandProceduresAsoftheendoftheperiodcoveredbythisreport,theCompanycarriedoutanevaluation,underthesupervisionandwiththeparticipationoftheCompany’smanagement,includingitsChiefExecutiveOfficerandChiefFinancialOfficer,oftheeffectivenessofthedesignandoperationoftheCompany’sdisclosurecontrolsandprocedurespursuanttoRule13a-15oftheSecuritiesExchangeActof1934(the“ExchangeAct”).Baseduponthatevaluation,theCompany’sChiefExecutiveOfficerandChiefFinancialOfficerconcludedthattheCompany’sdisclosurecontrolsandproceduresoverfinancialreportingwereeffectivetoensurethatmaterialinformationrequiredtobedisclosedbytheCompanyinthereportsthatitfilesor41submitsundertheExchangeActtoberecorded,processed,summarizedandreportedwithinthetimeperiodsspecifiedintheCommission’srulesandforms.ChangesinInternalControlOverFinancialReportingTherewerenochangesinourinternalcontrolsoverfinancialreportingduringthequarterendedDecember31,2019thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontrolsoverfinancialreporting.Management’sReportonInternalControlOverFinancialReportingOurmanagementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting,assuchtermisdefinedinExchangeActRule13a-15(f).Underthesupervisionandwiththeparticipationofmanagement,includingourChiefExecutiveOfficerandChiefFinancialOfficer,weconductedanevaluationoftheeffectivenessofourinternalcontroloverfinancialreportingbasedontheframeworkassetforthinInternalControl—IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttoriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.Basedonourevaluation,managementconcludedthatourinternalcontroloverfinancialreportingwaseffectiveasofDecember31,2019.OurinternalcontroloverfinancialreportingasofDecember31,2019hasbeenauditedbyUHYLLP,anindependentregisteredpublicaccountingfirm,asstatedinitsreportwhichappearsbelow.42REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMTotheShareholdersandtheBoardofDirectorsSagaCommunications,Inc.OpiniononInternalControloverFinancialReportingWehaveauditedSagaCommunications,Inc.’s(theCompany’s)internalcontroloverfinancialreportingasofDecember31,2019,basedoncriteriaestablishedinInternalControl—IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).Inouropinion,theCompanymaintained,inallmaterialrespects,effectiveinternalcontroloverfinancialreportingasofDecember31,2019,basedoncriteriaestablishedinInternalControl—IntegratedFramework(2013)issuedbyCOSO.Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates)(PCAOB),theconsolidatedbalancesheetsofSagaCommunications,Inc.asofDecember31,2019and2018,andtherelatedconsolidatedstatementsofincome,stockholders’equity,andcashflowsforeachofthethreeyearsintheperiodendedDecember31,2019andtherelatednotesandfinancialstatementschedule,andourreportdatedMarch13,2020expressedanunqualifiedopinionthereon.BasisforOpinionTheCompany’smanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancialreporting,andforitsassessmentoftheeffectivenessofinternalcontroloverfinancialreportingincludedintheaccompanyingManagement’sReportonInternalControloverFinancialReporting.OurresponsibilityistoexpressanopinionontheCompany’sinternalcontroloverfinancialreportingbasedonouraudit.WeareapublicaccountingfirmregisteredwiththePCAOBandarerequiredtobeindependentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.WeconductedourauditinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwasmaintainedinallmaterialrespects.Ourauditofinternalcontroloverfinancialreportingincludedobtaininganunderstandingofinternalcontroloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,andtestingandevaluatingthedesignandoperatingeffectivenessofinternalcontrolbasedontheassessedrisk.Ourauditalsoincludedperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.DefinitionandLimitationsofInternalControloverFinancialReportingAcompany’sinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Acompany’sinternalcontroloverfinancialreportingincludesthosepoliciesandproceduresthat(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsoftheCompany;(2)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsandexpendituresoftheCompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsoftheCompany;and(3)providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,ordispositionoftheCompany’sassetsthatcouldhaveamaterialeffectonthefinancialstatements.Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate./s/UHYLLPFarmingtonHills,MichiganMarch13,202043Item9B.OtherInformationNone.PARTIIIItem10.Directors,ExecutiveOfficersandCorporateGovernanceTheinformationrequiredbythisitemisincorporatedbyreferencetotheinformationcontainedinourProxyStatementforthe2020AnnualMeetingofStockholderstobefilednotlaterthan120daysaftertheendoftheCompany’sfiscalyear.SeealsoItem1.Business—ExecutiveOfficers.Item11.ExecutiveCompensationTheinformationrequiredbythisitemisincorporatedbyreferencetotheinformationcontainedinourProxyStatementforthe2020AnnualMeetingofStockholderstobefilednotlaterthan120daysaftertheendoftheCompany’sfiscalyear.Item12.SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMattersTheinformationrequiredbythisitemisincorporatedbyreferencetotheinformationcontainedinourProxyStatementforthe2020AnnualMeetingofStockholderstobefilednotlaterthan120daysaftertheendoftheCompany’sfiscalyear.Inaddition,theinformationcontainedinthe“SecuritiesAuthorizedforIssuanceUnderEquityCompensationPlanInformation”subheadingunderItem5ofthisreportisincorporatedbyreferenceherein.Item13.CertainRelationshipsandRelatedTransactions,andDirectorIndependenceTheinformationrequiredbythisitemisincorporatedbyreferencetotheinformationcontainedinourProxyStatementforthe2020AnnualMeetingofStockholderstobefilednotlaterthan120daysaftertheendoftheCompany’sfiscalyear.Item14.PrincipalAccountantFeesandServicesTheinformationrequiredbythisitemisincorporatedbyreferencetotheinformationcontainedinourProxyStatementforthe2020AnnualMeetingofStockholderstobefilednotlaterthan120daysaftertheendoftheCompany’sfiscalyear.44PARTIVItem15.ExhibitsandFinancialStatementSchedules(a)1.FinancialStatementsThefollowingconsolidatedfinancialstatementsattachedheretoarefiledaspartofthisannualreport:ReportofIndependentRegisteredPublicAccountingFirm...........................46ConsolidatedFinancialStatements:—ConsolidatedBalanceSheetsasofDecember31,2019and2018....................47—ConsolidatedStatementsofIncomefortheyearsendedDecember31,2019,2018and2017..............................................................48—ConsolidatedStatementsofStockholders’EquityfortheyearsendedDecember31,2019,2018and2017.......................................................49—ConsolidatedStatementsofCashFlowsfortheyearsendedDecember31,2019,2018and2017..............................................................50NotestoConsolidatedFinancialStatements......................................512.FinancialStatementSchedulesScheduleIIValuationandQualifyingAccountsisdisclosedinNote1totheConsolidatedFinancialStatementsattachedheretoandfiledaspartofthisannualreport.AllotherschedulesforwhichprovisionaremadeintheapplicableaccountingregulationsoftheSecuritiesandExchangeCommissionarenotrequiredundertherelatedinstructionsorareinapplicableandthereforehavebeenomitted.3.ExhibitsTheExhibitsfiledinresponsetoItem601ofRegulationS-KarelistedintheExhibitIndex,whichisincorporatedhereinbyreference.45REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMTotheShareholdersandtheBoardofDirectorsofSagaCommunications,Inc.OpinionontheFinancialStatementsWehaveauditedtheaccompanyingconsolidatedbalancesheetsofSagaCommunications,Inc.(the“Company”)asofDecember31,2019and2018,andtherelatedconsolidatedstatementsofincome,stockholders’equityandcashflowsforeachofthethreeyearsintheperiodendedDecember31,2019,andtherelatednotesandfinancialstatementScheduleII,ValuationandQualifyingAccountslistedintheindexatitem15(a)(2)(collectivelyreferredtoasthe“financialstatements”).Inouropinion,thefinancialstatementspresentfairly,inallmaterialrespects,theconsolidatedfinancialpositionofSagaCommunications,Inc.atDecember31,2019and2018,andtheconsolidatedresultsofitsoperationsanditscashflowsforeachofthethreeyearsintheperiodendedDecember31,2019,inconformitywithU.S.generallyacceptedaccountingprinciples.Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates)(PCAOB),theCompany’sinternalcontroloverfinancialreportingasofDecember31,2019,basedoncriteriaestablishedinInternalControl-IntegratedFrameworkissuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(2013framework),andourreportdatedMarch13,2020expressedanunqualifiedopinionthereon.BasisforOpinionThesefinancialstatementsaretheresponsibilityoftheCompany’smanagement.OurresponsibilityistoexpressanopinionontheCompany’sfinancialstatementsbasedonouraudits.WeareapublicaccountingfirmregisteredwiththePCAOBandarerequiredtobeindependentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.WeconductedourauditsinaccordancewiththestandardsofthePCAOB.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement,whetherduetoerrororfraud.Ourauditsincludedperformingprocedurestoassesstherisksofmaterialmisstatementofthefinancialstatements,whetherduetoerrororfraudandperformingproceduresthatrespondtothoserisks.Suchproceduresincludedexamining,onatestbasis,evidenceregardingtheamountsanddisclosuresinthefinancialstatements.Ourauditsalsoincludedevaluatingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethatourauditsprovideareasonablebasisforouropinion./s/UHYLLPWehaveservedastheCompany’sauditorsince2015.FarmingtonHills,MichiganMarch13,202046SagaCommunications,Inc.ConsolidatedBalanceSheets(Inthousands,exceptparvalue)December31,20192018ASSETSCurrentassets:Cashandcashequivalents.........................................$44,034$44,729Accountsreceivable,lessallowanceof$671($759in2018)..................18,96219,984Prepaidexpensesandothercurrentassets..............................2,4782,556Bartertransactions..............................................1,2461,326Totalcurrentassets...............................................66,72068,595Netpropertyandequipment.........................................58,71159,103Otherassets:Broadcastlicenses,net...........................................95,31195,250Goodwill....................................................18,96318,839Otherintangibles,rightofuseassets,deferredcostsandinvestments,netofaccumulatedamortizationof$14,711($13,682in2018)...................12,6896,690$252,394$248,477LIABILITIESANDSTOCKHOLDERS’EQUITYCurrentliabilities:Accountspayable...............................................$2,117$2,613Accruedexpenses:Payrollandpayrolltaxes........................................7,4397,899Dividendpayable.............................................1,7973,274Other.....................................................4,9963,072Bartertransactions..............................................1,1521,307Currentportionoflong-termdebt...................................—5,000Totalcurrentliabilities.............................................17,50123,165Deferredincometaxes.............................................25,15223,732Long-termdebt..................................................10,00015,000Otherliabilities..................................................7,3891,581Totalliabilities..................................................60,04263,478Commitmentsandcontingencies......................................——Stockholders’equity:Preferredstock,1,500sharesauthorized,noneissuedandoutstandingCommonstock:.....................................................——ClassAcommonstock,$.01parvalue,35,000sharesauthorized,6,771issued(6,732in2018).............................................6867ClassBcommonstock,$.01parvalue,3,500sharesauthorized,954issuedandoutstanding(923in2018)......................................99Additionalpaid-incapital.........................................66,81164,795Retainedearnings..............................................162,822156,689Treasurystock(1,735sharesin2019and1,703in2018,atcost)...............(37,358)(36,561)Totalstockholders’equity..........................................192,352184,999$252,394$248,477Seeaccompanyingnotes.47SagaCommunications,Inc.ConsolidatedStatementsofIncomeYearsEndedDecember31,201920182017(Inthousands,exceptpersharedata)Netoperatingrevenue...................................$123,072$124,829$118,149Operatingexpenses:Stationoperatingexpense...............................92,69293,72787,759Corporategeneralandadministrative.......................11,46011,35911,657Otheroperatingexpense,net.............................1126155Impairmentofintangibleassets...........................——1,449104,264105,147100,920Operatingincomefromcontinuingoperations..................18,80819,68217,229Other(income)expenses:Interestexpense......................................735946903Interestincome......................................(610)(631)—Otherincome.......................................(16)(23)—Incomefromcontinuingoperationsbeforeincometaxes...........18,69919,39016,326Incometaxprovision:Current............................................4,0003,0402,290Deferred...........................................1,4202,660(8,210)5,4205,700(5,920)Incomefromcontinuingoperations,netoftax..................13,27913,69022,246Incomefromdiscontinuedoperations,netoftax.................——32,471Netincome...........................................$13,279$13,690$54,717Basicearningspershare:Fromcontinuingoperations.............................$2.23$2.30$3.77Fromdiscontinuedoperations............................——5.50Basicearningspershare................................$2.23$2.30$9.27Weightedaveragecommonshares...........................5,8345,8295,803Dilutedearningspershare:Fromcontinuingoperations.............................$2.23$2.30$3.77Fromdiscontinuedoperations............................——5.50Dilutedearningspershare..............................$2.23$2.30$9.27Weightedaveragecommonandcommonequivalentshares..........5,8345,8295,807Dividendsdeclaredpershare..............................$1.20$1.45$2.00Seeaccompanyingnotes.48SagaCommunications,Inc.ConsolidatedStatementsofStockholders’EquityYearsendedDecember31,2019,2018and2017ClassACommonStockClassBCommonStockAdditionalPaid-InCapitalRetainedEarningsTreasuryStockTotalStockholders’EquitySharesAmountSharesAmount(Inthousands)BalanceatJanuary1,2017.......6,638$66878$8$59,557$108,733$(33,382)$134,982Netincome.................54,71754,717ConversionofsharesfromClassBtoClassA..................17—(17)—————Issuanceofrestrictedstock.......19—291(1)———Forfeitureofrestrictedstock......(1)——————Netproceedsfromexercisedoptions..................2118—826—(826)1Dividendsdeclaredpercommonshare....................—————(11,842)—(11,842)Compensationexpenserelatedtorestrictedstockawards........————2,279——2,279Purchaseofsharesheldintreasury..................——————(946)(946)401(k)plancontribution........————14—260274BalanceatDecember31,2017.....6,694$67898$9$62,675$151,608$(34,894)$179,465Netincome.................13,69013,690ConversionofsharesfromClassBtoClassA..................12—(12)—————Issuanceofrestrictedstock.......27—37—————Forfeitureofrestrictedstock......(1)———————Dividendsdeclaredpercommonshare....................—————(8,609)—(8,609)Compensationexpenserelatedtorestrictedstockawards........————2,201——2,201Purchaseofsharesheldintreasury..................——————(2,000)(2,000)401(k)plancontribution........————(81)—333252BalanceatDecember31,2018.....6,732$67923$9$64,795$156,689$(36,561)$184,999Netincome.................13,27913,279ConversionofsharesfromClassBtoClassA..................13—(13)—————Issuanceofrestrictedstock.......29144————1Forfeitureofrestrictedstock......(3)———————Dividendsdeclaredpercommonshare....................—————(7,146)—(7,146)Compensationexpenserelatedtorestrictedstockawards........————2,129——2,129Purchaseofsharesheldintreasury..................——————(1,172)(1,172)401(k)plancontribution........————(113)—375262BalanceatDecember31,2019.....6,771$68954$9$66,811$162,822$(37,358)$192,352Seeaccompanyingnotes.49SagaCommunications,Inc.ConsolidatedStatementsofCashFlowsYearsEndedDecember31,201920182017(Inthousands)Cashflowsfromoperatingactivities:Netincome..........................................$13,279$13,690$54,717Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:Incomefromdiscontinuedoperations......................——(32,471)Depreciationandamortization..........................6,9456,7866,251Deferredincometaxes................................1,4202,660(8,210)Impairmentofintangibleassets..........................——1,449Amortizationofdeferredcosts..........................1035153Compensationexpenserelatedtorestrictedstockawards........2,1292,2012,279Lossonsaleofassets.................................1126155(Gain)oninsuranceclaims.............................(16)(23)—Barterrevenue,net...................................(190)107(251)Deferredandothercompensation........................(634)62(337)Changesinassetsandliabilities:Increaseinreceivablesandprepaidexpenses................(5,780)(157)(434)Increaseinaccountspayable,accruedexpenses,andotherliabilities.......................................7,967121811Totaladjustments.....................................12,05611,869(30,805)Netcashprovidedbycontinuingoperatingactivities...............25,33525,55923,912Netcashprovidedby(usedin)discontinuedoperatingactivities.......——(18,538)Netcashprovidedbyoperatingactivities.......................25,33525,5595,374Cashflowsfrominvestingactivities:Acquisitionofpropertyandequipment......................(5,732)(5,922)(6,246)Proceedsfromsaleanddisposalofassets.....................270318419Acquisitionofbroadcastproperties.........................(763)(9,289)(25,856)Otherinvestingactivities.................................(10)17(5)Netcashusedincontinuinginvestingactivities...................(6,235)(14,876)(31,688)Netcashreceivedprovidedbydiscontinuedoperationsinvestingactivities............................................——69,193Netcash(usedin)receivedfrominvestingactivities................(6,235)(14,876)37,505Cashflowsfromfinancingactivities:Paymentsonlong-termdebt..............................(10,000)(5,000)(10,287)Cashdividendspaid....................................(8,623)(11,864)(5,313)Paymentsfordebtissuancecosts...........................—(120)—Purchaseofsharesheldintreasury.........................(1,172)(2,000)(946)Netcashusedinfinancingactivities..........................(19,795)(18,984)(16,546)Net(decrease)increaseincashandcashequivalents...............(695)(8,301)26,333Cashandcashequivalents,beginningofyear....................44,72953,03026,697Cashandcashequivalents,endofyear........................$44,034$44,729$53,030Seeaccompanyingnotes.50SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPoliciesNatureofBusinessSagaCommunications,Inc.isabroadcastingcompanywhosebusinessisdevotedtoacquiring,developingandoperatingbroadcastproperties.AsofDecember31,2019,weownedoroperatedseventy-nineFM,thirty-fourAMradiostationsandseventy-sevenmetrosignals,servingtwenty-sevenmarketsthroughouttheUnitedStates.OnSeptember1,2017theCompanysolditsJoplin,MissouriandVictoria,Texastelevisionstations.Thehistoricalresultsofoperationsforthetelevisionstationsarepresentedinthediscontinuedoperationsforallperiodspresented(seeNote4).AsaresultoftheCompany’stelevisionstationsbeingreportedasdiscontinuedoperationstheCompanyonlyhasonereportablesegmentatDecember31,2019,2018and2017.Unlessindicatedotherwise,theinformationintheNotestoConsolidatedFinancialStatementsrelatestotheCompany’scontinuingoperations.PrinciplesofConsolidationTheconsolidatedfinancialstatementsincludetheaccountsofSagaCommunications,Inc.andourwholly-ownedsubsidiaries.Allsignificantintercompanybalancesandtransactionshavebeeneliminatedinconsolidation.UseofEstimatesThepreparationofthefinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStates(GAAP)requiresustomakeestimatesandassumptionsthataffecttheamountsreportedinthefinancialstatementsandaccompanyingnotes.Whilewedonotbelievethattheultimatesettlementofanyamountsreportedwillmateriallyaffectourfinancialpositionorresultsoffutureoperations,actualresultsmaydifferfromestimatesprovided.ConcentrationofRiskCertaincashdepositswithfinancialinstitutionsmayattimesexceedFDICinsurancelimits.Ourtopfivemarketswhencombinedrepresented39%,41%and41%ofournetoperatingrevenuefortheyearsendedDecember31,2019,2018and2017,respectively.WeselladvertisingtolocalandnationalcompaniesthroughouttheUnitedStates.Weperformongoingcreditevaluationsofourcustomersandgenerallydonotrequirecollateral.Wemaintainanallowancefordoubtfulaccountsatalevelwhichwebelieveissufficienttocoverpotentialcreditlosses.CashandCashEquivalentsCashandcashequivalentsconsistofcashonhandandtimedepositswithoriginalmaturitiesofthreemonthsorless.WedidnothaveanytimedepositsatDecember31,2019and2018.FinancialInstrumentsOurfinancialinstrumentsarecomprisedofcashandcashequivalents,accountsreceivable,accountspayableandlong-termdebt.Thecarryingvalueofcashandcashequivalents,accountsreceivableandaccountspayableapproximatefairvalueduetotheirshortmaturities.Thecarryingvalueoflong-termdebtapproximatesfairvalueasitcarriesinterestratesthateitherfluctuatewiththeeuro-dollarrate,primerateorhavebeenresetattheprevailingmarketrateatDecember31,2019.AllowanceforDoubtfulAccountsAprovisionfordoubtfulaccountsisrecordedbasedonourjudgmentofthecollectabilityofreceivables.Amountsarewrittenoffwhendeterminedtobefullyuncollectible.Delinquentaccountsarebasedon51SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPolicies–(continued)contractualterms.TheactivityintheallowancefordoubtfulaccountsduringtheyearsendedDecember31,2019,2018and2017wasasfollows:YearEndedBalanceatBeginningofPeriodChargedtoCostsandExpensesAllowanceFromAcquisitionsWriteOffofUncollectibleAccounts,NetofRecoveriesBalanceatEndofPeriod(inthousands)December31,2019.................$759$578$—$(666)$671December31,2018.................$727$444$25$(437)$759December31,2017.................$518$333$181$(305)$727BarterTransactionsOurradioandtelevisionstationstradeairtimeforgoodsandservicesusedprincipallyforpromotional,salesandotherbusinessactivities.Anassetandaliabilityarerecordedatthefairmarketvalueofgoodsorservicesreceived.Barterrevenueisrecordedwhencommercialsarebroadcast,andbarterexpenseisrecordedwhengoodsorservicesreceivedareused.PropertyandEquipmentPropertyandequipmentarecarriedatcost.Expendituresformaintenanceandrepairsareexpensedasincurred.Whenpropertyandequipmentissoldorotherwisedisposedof,therelatedcostandaccumulateddepreciationisremovedfromtherespectiveaccountsandthegainorlossrealizedondispositionisreflectedinearnings.Depreciationisprovidedusingthestraight-linemethodbasedontheestimatedusefullifeoftheassets.Wereviewourpropertyandequipmentforimpairmentwhenevereventsorchangesincircumstancesindicatethecarryingamountofanassetmaynotberecoverable.Recoverabilityoftheseassetsismeasuredbycomparisonoftheircarryingamountstofutureundiscountedcashflowstheassetsareexpectedtogenerate.Iftheassetsareconsideredtobeimpaired,theimpairmenttoberecognizedequalstheamountbywhichthecarryingvalueoftheassetsexceedsitsfairmarketvalue.Wedidnotrecordanyimpairmentofpropertyandequipmentduring2019,2018and2017.Propertyandequipmentconsistedofthefollowing:EstimatedUsefulLifeDecember31,20192018(Inthousands)Landandlandimprovements....................—$14,693$14,402Buildings..................................31.5years37,98435,812Towersandantennae.........................7-15years24,76225,959Equipment.................................3-15years54,32153,752Furniture,fixturesandleaseholdimprovements.......7-20years7,1696,740Vehicles...................................5years3,4743,555142,403140,220Accumulateddepreciation......................(83,692)(81,117)Netpropertyandequipment....................$58,711$59,103DepreciationexpenseforcontinuingoperationsfortheyearsendedDecember31,2019,2018and2017was$5,916,000,$5,692,000and$5,391,000,respectively.DepreciationexpensefordiscontinuedoperationsfortheyearsendedDecember31,2019,2018and2017was$0,$0and$445,000,respectively.52SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPolicies–(continued)IntangibleAssetsIntangibleassetsdeemedtohaveindefiniteusefullives,whichincludebroadcastlicensesandgoodwill,arenotamortizedandaresubjecttoimpairmenttestswhichareconductedasofOctober1ofeachyear,ormorefrequentlyifimpairmentindicatorsarise.Wehave113broadcastlicensesserving27markets,whichrequirerenewalovertheperiodof2020-2028.IndeterminingthattheCompany’sbroadcastlicensesqualifiedasindefinite-livedintangibleassets,managementconsideredavarietyoffactorsincludingourbroadcastlicensesmayberenewedindefinitelyatlittlecost;ourbroadcastlicensesareessentialtoourbusinessandweintendtorenewourlicensesindefinitely;wehaveneverbeendeniedtherenewalofanFCCbroadcastlicensenordowebelievethattherewillbeanycompellingchallengetotherenewalofourbroadcastlicenses;andwedonotbelievethatthetechnologyusedinbroadcastingwillbereplacedbyanothertechnologyintheforeseeablefuture.Separableintangibleassetsthathavefinitelivesareamortizedovertheirusefullivesusingthestraight-linemethod.Favorableleaseagreementsareamortizedovertheleaseslength,rangingfromonetotwenty-sixyears.Otherintangiblesareamortizedoveronetofifteenyears.Customerrelationshipsareamortizedoverthreeyears.DeferredCostsThecostsrelatedtotheissuanceofdebtarecapitalizedandamortizedtointerestexpenseoverthelifeofthedebt.AsaresultoftheSecondAmendmentin2018,theweincurredanadditional$120,000oftransactionfeesrelatedtotheCreditFacilitythatwerecapitalized.ThecumulativetransactionfeesarebeingamortizedovertheremaininglifeoftheCreditFacility.DuringtheyearsendedDecember31,2019,2018and2017,werecognizedinterestexpenserelatedtotheamortizationofdebtissuancecostsof$103,000,$51,000and$53,000,respectively.AtDecember31,2019and2018thenetbookvalueofdebtissuancecostsrelatedtoourlineofcreditwas$104,000,and$207,000,respectively,andwaspresentedinotherintangibles,deferredcostsandinvestmentsinourConsolidatedBalanceSheets.LeasesWedeterminewhetheracontractisorcontainsaleaseatinception.Theleaseliabilitiesandright-of-useassetsarerecordedonthebalancesheetforallleaseswithanexpectedtermofatleastoneyear,basedonthepresentvalueoftheleasepaymentsusing(1)therateimplicitintheleaseor(2)ourincrementalborrowingrate(“IBR”).OurIBRisdefinedastherateofinterestwewouldhavetopaytoborrowonacollateralizedbasisoverasimilartermanamountequaltotheleasepaymentsinasimilareconomicenvironment.Wefollowtheaccountingguidanceforleases,whichincludestherecognitionofleaseexpenseforleasesonastraight-linebasisovertheleaseterm.SeeNote13—CommitmentsandContingenciesformoreinformationonLeases.TreasuryStockInMarch2013,ourboardofdirectorsauthorizedanincreaseintheamountcommittedtoourStockBuy-BackProgram(the“Buy-BackProgram”)from$60millionto$75.8million.TheBuy-BackProgramallowsustorepurchaseourClassACommonStock.AsofDecember31,2019,wehadremainingauthorizationof$19.2millionforfuturerepurchasesofourClassACommonStock.RepurchasesofsharesofourCommonStockarerecordedasTreasurystockandresultinareductionofStockholders’equity.During2019,2018and2017,weacquired39,505sharesatanaveragepriceof$29.6853SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPolicies–(continued)pershare,53,713sharesatanaveragepriceof$37.24pershareand37,141sharesatanaveragepriceof$47.72pershare,respectively.RevenueRecognitionRevenuefromthesaleofcommercialbroadcasttimetoadvertisersisrecognizedwhencommercialsarebroadcast.Revenueisreportednetofadvertisingagencycommissions.Agencycommissions,whenapplicablearebasedonastatedpercentageappliedtogrossbilling.AllrevenueisrecognizedinaccordancewiththeSecuritiesandExchangeCommission’s(“SEC”)StaffAccountingBulletin(“SAB”)No.104,Topic13,RevenueRecognitionRevisedandUpdatedandTheAccountingStandardsCodification(ASC)Topic606,RevenuefromContractswithCustomers.LocalMarketingAgreementsWehaveenteredintoTimeBrokerageAgreements(“TBAs”)orLocalMarketingAgreements(“LMAs”)incertainmarkets.InatypicalTBA/LMA,theFCClicenseeofastationmakesavailable,forafee,blocksofairtimeonitsstationtoanotherpartythatsuppliesprogrammingtobebroadcastduringthatairtimeandsellsitsowncommercialadvertisingannouncementsduringthetimeperiodsspecified.RevenueandexpensesrelatedtoTBAs/LMAsareincludedintheaccompanyingConsolidatedStatementsofIncome.AssetsandliabilitiesrelatedtotheTBAs/LMAsareincludedintheaccompanyingConsolidatedBalanceSheets.AdvertisingandPromotionCostsAdvertisingandpromotioncostsareexpensedasincurred.Suchcostsrelatedtoourcontinuingoperationsamountedto$2,442,000,$2,438,000and$2,441,000fortheyearsendedDecember31,2019,2018and2017,respectively.Advertisingandpromotioncostsrelatedtoourdiscontinuedoperationsamountedto$0,$0and$240,000fortheyearsendedDecember31,2019,2018and2017,respectively.IncomeTaxesTheprovisionforincometaxesiscalculatedusingtheassetandliabilitymethod,underwhichdeferredtaxassetsandliabilitiesaredeterminedbasedontemporarydifferencesbetweenthefinancialreportingandtaxbasisofassetsandliabilitiesandaremeasuredusingtheenactedtaxratesandlawsthatareexpectedtobeineffectwhenthedifferencesareexpectedtoreverse.Inassessingtherealizabilityofdeferredtaxassets,weconsiderwhetheritismorelikelythannotthatsomeportionorallofthedeferredtaxassetswillnotberealized.Therealizationofdeferredtaxassetsisprimarilydependentuponthegenerationoffuturetaxableincome.Oureffectivetaxrateishigherthanthefederalstatutoryrateasaresultoftheinclusionofstatetaxesintheincometaxamount.DividendsOnDecember11,2019,theCompany’sBoardofDirectorsdeclaredaquarterlycashdividendof$0.30pershareonitsClassesAandBshares.Thisdividendtotalingapproximately$1.8millionwaspaidonJanuary17,2020toshareholdersofrecordonDecember27,2019andfundedbycashontheCompany’sbalancesheet.OnSeptember12,2019,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonOctober11,2019toshareholdersofrecordonSeptember23,2019andfundedbycashontheCompany’sbalancesheet.54SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPolicies–(continued)OnMay30,2019,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonJuly5,2019toshareholdersofrecordonJune14,2019andfundedbycashontheCompany’sbalancesheet.OnFebruary26,2019,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonMarch29,2019toshareholdersofrecordonMarch12,2019andfundedbycashontheCompany’sbalancesheet.OnNovember28,2018,theCompany’sBoardofDirectorsdeclaredaquarterlycashdividendof$0.30pershareandaspecialcashdividendof$0.25pershareonitsClassesAandBshares.Thisdividendtotalingapproximately$3.3millionwaspaidonJanuary4,2019toshareholdersofrecordonDecember10,2018andfundedbycashontheCompany’sbalancesheet.OnAugust14,2018,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8millionwaspaidonSeptember14,2018toshareholdersofrecordonAugust31,2018andfundedbycashontheCompany’sbalancesheet.OnMay15,2018,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonJune22,2018toshareholdersofrecordonMay31,2018andfundedbycashontheCompany’sbalancesheet.OnFebruary28,2018,theCompany’sBoardofDirectorsdeclaredaregularquarterlycashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonMarch30,2018toshareholdersofrecordonMarch12,2018andfundedbycashontheCompany’sbalancesheet.OnDecember7,2017,theCompany’sBoardofDirectorsdeclaredaquarterlycashdividendof$0.30pershareandaspecialcashdividendof$0.80pershareonitsClassesAandBshares.Thisdividendtotalingapproximately$6.5millionwaspaidonJanuary5,2018toshareholdersofrecordonDecember18,2017andfundedbycashontheCompany’sbalancesheet.OnSeptember13,2017,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8millionwaspaidonOctober13,2017toshareholdersofrecordonSeptember25,2017andfundedbycashontheCompany’sbalancesheet.OnMay3,2017,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonJune9,2017toshareholdersofrecordonMay22,2017andfundedbycashontheCompany’sbalancesheet.OnMarch3,2017,theCompany’sBoardofDirectorsdeclaredaregularquarterlycashdividendof$0.30pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.8million,waspaidonApril14,2017toshareholdersofrecordonMarch28,2017andfundedbycashontheCompany’sbalancesheet.Stock-BasedCompensationStock-basedcompensationcostforstockoptionawardsisestimatedonthedateofgrantusingaBlack-Scholesvaluationmodelandisexpensedonastraight-linemethodoverthevestingperiodoftheoptions.55SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPolicies–(continued)Stock-basedcompensationexpenseisrecognizednetofestimatedforfeitures.ThefairvalueofrestrictedstockawardsisdeterminedbasedontheclosingmarketpriceofourClassACommonStockonthegrantdateandisadjustedateachreportingdatebasedontheamountofsharesultimatelyexpectedtovest.SeeNote8—Stock-BasedCompensationforfurtherdetailsregardingtheexpensecalculatedunderthefairvaluebasedmethod.EarningsPerShareEarningspershareiscalculatedusingthetwo-classmethod.Thetwo-classmethodisanearningsallocationformulathatdeterminesearningspershareforeachclassofcommonstockandparticipatingsecurity.Wehaveparticipatingsecuritiesrelatedtorestrictedstockunits,grantedunderourSecondAmendedandRestated2005IncentiveCompensationPlan,thatearndividendsonanequalbasiswithcommonshares.Inapplyingthetwo-classmethod,earningsareallocatedtobothcommonsharesandparticipatingsecurities.Thefollowingtablesetsforththecomputationofbasicanddilutedearningspershare:YearsEndedDecember31,201920182017(Inthousands,exceptpersharedata)Numerator:Incomefromcontinuingoperations............................$13,279$13,690$22,246Less:Incomeallocatedtounvestedparticipatingsecurities............292256370Incomefromcontinuingoperationsavailabletocommonstockholders...$12,987$13,434$21,876Incomefromdiscontinuedoperations..........................$—$—$32,471Less:Incomeallocatedtounvestedparticipatingsecurities............——541Incomefromdiscontinuedoperationsavailabletocommonstockholders..$—$—$31,930Netincomeavailabletocommonstockholders....................$12,987$13,434$53,806Denominator:Denominatorforbasicearningspershare-weightedaverageshares......5,8345,8295,803Effectofdilutivesecurities:Stockoptions...........................................——4Denominatorfordilutedearningspershare–adjustedweighted-averagesharesandassumedconversions............................5,8345,8295,807Basicearningspershare:Fromcontinuingoperations.................................$2.23$2.30$3.77Fromdiscontinuedoperations................................——5.50Basicearningspershare....................................$2.23$2.30$9.27DilutedearningspershareFromcontinuingoperations.................................$2.23$2.30$3.77Fromdiscontinuedoperations................................——5.50Dilutedearningspershare..................................$2.23$2.30$9.27TherewerenostockoptionsoutstandingthathadanantidilutiveeffectonourearningspersharecalculationfortheyearsendedDecember31,2019,2018,and2017,respectively.Theactualeffectoftheseshares,ifany,onthedilutedearningspersharecalculationwillvarysignificantlydependingonfluctuationsinthestockprice.56SagaCommunications,Inc.NotestoConsolidatedFinancialStatements1.SummaryofSignificantAccountingPolicies–(continued)RecentAccountingPronouncementsRecentlyAdoptedAccountingPronouncementsInFebruary2016,theFASBissuedAccountingStandardsUpdateNo.2016-02,“Leases(Topic842)”(“ASU2016-02”)whichrequiresthatallleaseswithatermofmorethanoneyear,coveringleasedassetssuchasrealestate,broadcastingtowersandequipment,bereflectedonthebalancesheetasassetsandliabilitiesfortherightsandobligationscreatedbytheseleases.ASU2016-02iseffectiveforfiscalyearsandinterimperiodsbeginningafterDecember15,2018.In2018,theFASBissuedseveralupdatestoaddresscertainpracticalexpedients,codificationimprovements,andtargetedimprovementstotheoriginalguidance.Thisstandardandallupdates(the“newleasestandard”)wereadoptedonJanuary1,2019.Weadoptedthenewleasestandardusingthemodifiedretrospectivemethod.Prioryearfinancialstatementswerenotrecastunderthenewstandardand,therefore,havenotbeenreflectedassuchonourDecember31,2018balancesheet.Weelectedthepackageoftransitionpracticalexpedients,whichallowedustocarryforwardourhistoricalassessmentof(1)whethercontractsareorcontainleases,(2)leaseclassification,and(3)initialdirectcosts.Weelectedtonotseparateleaseandnon-leasecomponents,forallleases.Wealsoelectedtomaketheaccountingpolicyelectionforshort-termleasesresultinginleasepaymentsbeingrecordedasanexpenseonastraight-linebasisovertheleaseterm.Asaresultoftheadoptionofthenewleasestandardwerecordedrightofuseassetsandleaseliabilitiesofapproximately$6.7milliononJanuary1,2019onourcondensedconsolidatedbalancesheet.Theadoptionofthenewleasestandardhadnoimpactonretainedearningsandhadnoimpactonthestatementofcashflows.SeeNote13“CommitmentsandContingencies”foradditionalinformationaboutthisadoption.RecentAccountingPronouncements—NotYetAdoptedInDecember2019,theFASBissuedASUNo.2019-02,“IncomeTaxes(Topic740):SimplifyingtheAccountingforIncomeTaxes”(“ASU2019-12”),whichisintendedtosimplifyvariousaspectsrelatedtoaccountingforincometaxes.ASU2019-12removescertainexceptionstothegeneralprinciplesinTopic740andalsoclarifiesandamendsexistingguidanceregardingthetaxtreatmentofcertainfranchisetaxes,goodwillandnontaxableentities,amongotheritemstoimproveconsistentapplication.ASU2019-12iseffectiveforfiscalyearsbeginningafterDecember15,2021andinterimperiodsbeginningafterDecember15,2022.Wearecurrentlyevaluatingtheimpactofthisstandardonourconsolidatedfinancialstatements.InJanuary2017,theFASBissuedASU2017-04,“Intangibles—GoodwillandOther(Topic355)”(“ASU2017-04”)whichremovesstep2fromthegoodwillimpairmenttest.Underthenewguidance,ifareportingunit’scarryingamountexceedsitfairvalue,anentitywillrecordanimpairmentchargebasedonthatdifference.Theimpairmentchargewillbelimitedtotheamountofgoodwillallocatedtothatreportingunit.ASU2017-04willbeappliedprospectivelyandiseffectiveforfiscalyearsandinterimimpairmenttestsperformedinperiodsbeginningafterDecember15,2019withearlyadoptionpermitted.Wearecurrentlyevaluatingtheimpactofadoptingthisstandardonourconsolidatedfinancialstatementsbutdonotexpecttheretobeamaterialimpactonthosestatements.InJune2016,theFASBissuedASUNo.2016-13,“FinancialInstruments—CreditLosses(Topic326):MeasurementofCreditLossesonFinancialInstruments”(“ASU2016-13”),whichamendsguidanceonreportingcreditlossesforassetsheldatamortizedcostbasisandavailableforsaledebtsecurities.ASU2016-13iseffectiveforfiscalyearsandinterimperiodsbeginningafterDecember15,2019.Wearecurrentlyevaluatingtheimpactthatthisstandardwillhaveonourconsolidatedfinancialstatementsanddonotexpectamaterialimpactonourfinancialstatements.2.RevenueAdoptionofthenewrevenuestandardWeadoptedTopic606onJanuary1,2018,usingthemodifiedretrospectivemethodwithnoimpactonourfinancialstatements.ThecumulativeeffectofinitiallyadoptingtheTopic606guidancehadnoimpact57SagaCommunications,Inc.NotestoConsolidatedFinancialStatements2.Revenue–(continued)ontheopeningbalanceofretainedearningsasofJanuary1,2018.ResultsforreportingperiodsbeginningafterJanuary1,2018arepresentedunderTopic606revenuestandard,whilepriorperiodsamountsarenotadjustedandcontinuetobereportedinaccordancewithourhistoricaccountingunderTopic605.DisaggregationofRevenueThefollowingtablepresentsrevenuesdisaggregatedbyrevenuesource:TwelveMonthsEndedDecember31,201920182017(inthousands)TypesofRevenueBroadcastAdvertisingRevenue,net...................$112,278$114,929$109,175DigitalAdvertisingRevenue........................3,7833,9003,610OtherRevenue..................................7,0116,0005,364NetRevenue...................................$123,072$124,829$118,149NatureofgoodsandservicesThefollowingisadescriptionofprincipalactivitiesfromwhichwegenerateourrevenue:BroadcastAdvertisingRevenueOurprimarysourceofrevenueisfromthesaleofadvertisingforbroadcastonourstations.Werecognizerevenuefromthesaleofadvertisingasperformanceobligationsaresatisfieduponairingoftheadvertising;therefore,revenueisrecognizedatapointintimewheneachadvertisingspotistransmitted.Agencycommissionsarecalculatedbasedonastatedpercentageappliedtogrossbillingrevenueforouradvertisinginventoryplacedbyagencyandarereportedasareductionofadvertisingrevenue.DigitalAdvertisingRevenueWerecognizerevenuefromourdigitalinitiativesacrossmultipleplatformssuchastargeteddigitaladvertising,onlinepromotions,advertisingonourwebsites,mobilemessaging,emailmarketingandothere-commerce.Revenueisrecordedwheneachspecificperformanceobligationinthedigitaladvertisingcampaigntakesplace,typicallywithinaonemonthperiod.OtherRevenueOtherrevenueincludesrevenuefromconcerts,promotionalevents,towerrentandothermiscellaneousitems.Revenueisgenerallyrecognizedwhentheeventiscompleted,asthepromotionaleventsarecompletedoraseachperformanceobligationissatisfied.ContractLiabilitiesPaymentsfromouradvertisersaregenerallyduewithin30daysalthoughcertainadvertisersarerequiredtopayinadvance.Whenanadvertiserpaysfortheservicesinadvanceoftheperformanceobligationstheseprepaymentsareascontractliabilities.Typicalcontractliabilitiesrelatetoprepaymentsforadvertisingspotsnotyetrun;prepaymentsfromsponsorsforeventsthathavenotyetbeenheld;andgiftcardssoldonourwebsitesusedtofinanceabroadcastadvertisingcampaign.GenerallyallcontractliabilitiesareexpectedtoberecognizedwithinoneyearandareincludedinaccountspayableintheCompany’sConsolidatedFinancialStatementsandareimmaterial.58SagaCommunications,Inc.NotestoConsolidatedFinancialStatements2.Revenue–(continued)TransactionPriceAllocatedtotheRemainingPerformanceObligationsAsthemajorityofourcontractsareoneyearorless,wehaveutilizedtheoptionalexemptionunderASC606-10-50-14andwillnotdiscloseinformationabouttheremainingperformanceobligationsforcontractswhichhaveoriginalexpecteddurationsofoneyearorless.3.BroadcastLicenses,GoodwillandOtherIntangibleAssetsWeevaluateourFCClicensesforimpairmentannually,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheassetmightbeimpaired.Weoperateourbroadcastlicensesineachmarketasasingleassetanddeterminethefairvaluebyrelyingonadiscountedcashflowapproachassumingastart-upscenarioinwhichtheonlyassetsheldbyaninvestorarebroadcastlicenses.Thefairvaluecalculationcontainsassumptionsincorporatingvariablesthatarebasedonpastexperiencesandjudgmentsaboutfutureoperatingperformanceusingindustrynormalizedinformationforanaveragestationwithinamarket.Thesevariablesinclude,butarenotlimitedto:(1)theforecastedgrowthrateofeachradioortelevisionmarket,includingpopulation,householdincome,retailsalesandotherexpendituresthatwouldinfluenceadvertisingexpenditures;(2)theestimatedavailableadvertisingrevenuewithinthemarketandtherelatedmarketshareandprofitmarginofanaveragestationwithinamarket;(3)estimatedcapitalstart-upcostsandlossesincurredduringtheearlyyears;(4)risk-adjusteddiscountrate;(5)thelikelymediacompetitionwithinthemarketarea;and(6)terminalvalues.IfthecarryingamountofFCClicensesisgreaterthantheirestimatedfairvalueinagivenmarket,thecarryingamountofFCClicensesinthatmarketisreducedtoitsestimatedfairvalue.Wealsoevaluategoodwillineachofitsreportingunits(reportablesegment)forimpairmentannually,ormorefrequentlyifcertaincircumstancesarepresent.Ifthecarryingamountofgoodwillinareportingunitisgreaterthantheimpliedvalueofgoodwilldeterminedbycompletingahypotheticalpurchasepriceallocationusingestimatedfairvalueofthereportingunit,thecarryingamountofgoodwillinthatreportingunitisreducedtoitsimpliedvalue.WeutilizeindependentappraisalsintestingFCClicensesforimpairmentwhenindicatorsofimpairmentarepresent.Weevaluateamortizableintangibleassetsforrecoverabilitywhencircumstancesindicateimpairmentmayhaveoccurred,usinganundiscountedcashflowmethodology.Ifthefutureundiscountedcashflowsfortheintangibleassetarelessthannetbookvalue,thenthenetbookvalueisreducedtotheestimatedfairvalue.Amortizableintangibleassetsareincludedinotherintangibles,deferredcostsandinvestmentsintheconsolidatedbalancesheets.BroadcastLicensesWehaverecordedthechangestobroadcastlicensesfortheyearsendedDecember31,2019and2018asfollows:Total(inthousands)BalanceatJanuary1,2018.........................................$93,259Acquisitions..................................................1,991BalanceatDecember31,2018......................................$95,250Acquisitions..................................................61BalanceatDecember31,2019......................................$95,31159SagaCommunications,Inc.NotestoConsolidatedFinancialStatements3.BroadcastLicenses,GoodwillandOtherIntangibleAssets–(continued)2019ImpairmentTestWecompletedourannualimpairmenttestofbroadcastlicensesduringthefourthquarterof2019anddeterminedthatthefairvalueofthebroadcastlicenseswasgreaterthanthecarryingvaluerecordedforeachofourmarketsand,accordingly,noimpairmentwasrecorded.Thefollowingtablereflectscertainkeyestimatesandassumptionsusedintheimpairmenttestinthefourthquarterof2019,2018and2017.Therangesforoperatingprofitmarginandmarketlong-termrevenuegrowthratesvarybymarket.Ingeneral,whencomparingbetween2019,2018and2017:(1)themarketspecificoperatingprofitmarginrangeremainedrelativelyconsistent;(2)themarketlong-termrevenuegrowthrateswererelativelyconsistent;(3)thediscountrateremainedrelativelyconsistent;and(4)currentyearrevenueswere0.7%lowerthanpreviouslyprojectedfor2019.FourthQuarter2019FourthQuarter2018FourthQuarter2017Discountrates.......................12.2%-12.2%12.0%-12.0%12.4%-12.5%Operatingprofitmarginranges...........19.0%-36.4%19.0%-36.4%19.0%-36.4%Marketlong-termrevenuegrowthrates.....0.0%-2.9%0.5%-2.9%1.1%-3.5%Ifactualmarketconditionsarelessfavorablethanthoseestimatedbyusorifeventsoccurorcircumstanceschangethatwouldreducethefairvalueofourbroadcastlicensesbelowthecarryingvalue,wemayberequiredtorecognizeadditionalimpairmentchargesinfutureperiods.Suchachargecouldhaveamaterialeffectonourconsolidatedfinancialstatements.2018ImpairmentTestDuringthefourthquarterof2018,wecompletedourannualimpairmenttestofbroadcastlicensesanddeterminedthatthefairvalueofthebroadcastlicenseswasgreaterthanthecarryingvaluerecordedforeachofourmarketsand,accordingly,noimpairmentwasrecorded.2017ImpairmentTestWecompletedourannualimpairmenttestofbroadcastlicensesduringthefourthquarterof2017anddeterminedthatthefairvalueofthebroadcastlicenseswerelessthantheamountreflectedinthebalancesheetforoneoftheCompany’sradiomarkets,Springfield,Illinois,andrecordednon-cashimpairmentchargeof$1,449,000toreducethecarryingvalueoftheseassetstotheestimatedfairmarketvalue.Thereasonsfortheimpairmenttothebroadcastinglicensesrecognizedinthefourthquarterof2017wereprimarilyduetodeclinesinavailablemarketrevenue,marketrevenueshare,profitmarginsandestimatedlong-termgrowthratesinourSpringfield,Illinoismarket.GoodwillDuringthefourthquarterof2019,weperformedourannualimpairmenttestofgoodwillinaccordancewithASC350anddeterminedunderthefirststepthatthefairvaluewasinexcessofitscarryingvalueaccordingly,noimpairmentwasrecorded.60SagaCommunications,Inc.NotestoConsolidatedFinancialStatements3.BroadcastLicenses,GoodwillandOtherIntangibleAssets–(continued)WehaverecordedthechangestogoodwillforeachoftheyearsendedDecember31,2019and2018asfollows:Total(inthousands)BalanceatJanuary1,2018.........................................$15,558Acquisitions..................................................3,281BalanceatDecember31,2018......................................$18,839Acquisitions..................................................124BalanceatDecember31,2019......................................$18,963OtherIntangibleAssetsWehaverecordedamortizableintangibleassetsatDecember31,2019asfollows:GrossCarryingAmountAccumulatedAmortizationNetAmount(Inthousands)Non-competitionagreements.........................$3,861$3,861$—Favorableleaseagreements..........................5,9655,539426Customerrelationships.............................4,6603,5841,076Otherintangibles.................................1,8341,727107Totalamortizableintangibleassets.....................$16,320$14,711$1,609WehaverecordedamortizableintangibleassetsatDecember31,2018asfollows:GrossCarryingAmountAccumulatedAmortizationNetAmount(Inthousands)Non-competitionagreements.........................$3,861$3,861$—Favorableleaseagreements..........................5,9655,504461Customerrelationships.............................4,6602,6342,026Otherintangibles.................................1,9431,683260Totalamortizableintangibleassets.....................$16,429$13,682$2,747AggregateamortizationexpensefortheseintangibleassetsfortheyearsendedDecember31,2019,2018and2017,was$1,029,000,$1,094,000and$860,000,respectively.OurestimatedannualamortizationexpensefortheyearsendingDecember31,2020,2021,2022,2023and2024is$813,000,$387,000,$39,000,$35,000and$33,000,respectively.4.DiscontinuedOperationsOnMay9,2017weenteredintoadefinitiveagreementtosellourJoplin,MissouriandVictoria,Texastelevisionstations(“TelevisionSale”)forapproximately$66.6million,subjecttocertainadjustments,toEveningTelegramCompanyd/b/aMorganMurphyMedia.TheTelevisionSalewascompletedonSeptember1,2017andwereceivednetproceedsof$69.5millionwhichincludedthesalespriceof$66.6million,thesaleofaccountsreceivableofapproximately$3.4million,offsetbycertainclosingadjustmentsandtransactionalcostsof$500thousand.Werecognizedapretaxgainof$50.8millionasa61SagaCommunications,Inc.NotestoConsolidatedFinancialStatements4.DiscontinuedOperations–(continued)resultoftheTelevisionSaleinthethirdquarterof2017.ThegainnetoftaxfortheTelevisionSalewas$29.9million.EffectiveSeptember1,2017,weused$24.2millionoftheproceedsfromtheTelevisionSaletofinancetheacquisitionofradiostationsinSouthCarolina,whichincludedthepurchasepriceof$23million,thepurchaseof$1.3millioninaccountsreceivableoffsetbycertainclosingadjustmentsandtransactionalcostsofapproximately$50,000(asdescribedinNote10).OnOctober5,2017andNovember3,2017,weused$5,287,000and$5,000,000respectivelyoftheproceedsfromtheTelevisionSaletopaydownaportionofitsRevolvingCreditFacility(asdefinedanddescribedinNote5).InaccordancewithauthoritativeguidancewehavereportedtheresultsofoperationsoftheJoplin,MissouriandVictoria,Texastelevisionstationsasdiscontinuedoperationsintheaccompanyingconsolidatedfinancialstatements.Forallpreviouslyreportedperiods,certainamountsintheconsolidatedfinancialstatementshavebeenreclassified.AlloftheassetsandliabilitiesoftheJoplin,MissouriandVictoria,Texastelevisionstationshavebeenclassifiedasdiscontinuedoperationsandthenetresultsofoperationshavebeenreclassifiedfromcontinuingoperationstodiscontinuedoperations.Thesewerepreviouslyincludedinourtelevisionsegment.ThefollowingtableshowsthecomponentsoftheresultsfromdiscontinuedoperationsassociatedwiththeTelevisionSaleasreflectedintheCompany’sConsolidatedStatementsofOperations(inthousands):YearEndedDecember31,201920182017(4)Netoperatingrevenue..................................$—$—$14,238Stationoperatingexpense(1)..............................——9,757Otheroperating(income)expense.........................——31Operatingincome.....................................——4,450Interestexpense(2).....................................——21Incomebeforeincometaxes..............................——4,429Pretaxgainonthedisposalofdiscontinuedoperations...........——50,842Totalpretaxgainondiscontinuedoperations..................——55,271Incometaxexpense(3)..................................——22,800Incomefromdiscontinuedoperations,netoftax...............$—$—$32,471(1)NodepreciationexpensewasrecordedbytheCompanybeginningMay9,2017,thedatetheTelevisionsegmentassets’wereheldforsale.(2)InterestexpenserelatedtotheSurtseydebtthatisguaranteedbytheTelevisionstations.OuraffiliaterepaidthisloanwhenthetelevisionstationsweresoldonSeptember1,2017.(3)Theeffectivetaxrateonpretaxincomefromdiscontinuedoperationswasapproximately41%.(4)ResultsofoperationsfortheTelevisionstationsarereflectedthroughAugust31,2017.TheeffectivedateofthesalewasSeptember1,2017.62SagaCommunications,Inc.NotestoConsolidatedFinancialStatements4.DiscontinuedOperations–(continued)ThefollowingtablerepresentsthecomponentsoftheresultsfromdiscontinuedoperationsassociatedwiththeTelevisionSaleasreflectedintheCompany’sConsolidatedStatementsofCashFlows(inthousands):December31,2019December31,2018December31,2017CashpaidduringtheperiodInterest.................................$—$—$21Incometaxes.............................——23,260Significantoperatingnon-cashitemsDepreciationandamortization(1)................$—$—$445Broadcastprogramrightsamortization...........——418Barterrevenue,net.........................——18Acquisitionofpropertyandequipment...........———Loss(gain)onsaleofassets...................——31Pretaxgainontelevisionsale..................——50,842SignificantinvestingitemsAcquisitionofpropertyandequipment...........$—$—$335Proceedsfromsaleanddisposalofassets..........———Netproceedsfromsaleoftelevisionstations(2)......——69,528Proceedsfrominsuranceclaim.................———(1)NodepreciationexpensewasrecordedbytheCompanybeginningMay9,2017,thedatetheTelevisionsegmentassets’wereheldforsale.(2)Netproceedsfromthesaleofthetelevisionstationsreflectthesalespriceof$66.6million,thesaleofaccountsreceivableofapproximately$3.4million,offsetbycertainclosingadjustmentsandtransactionalcostsofapproximately$500thousand.5.Long-TermDebtLong-termdebtconsistedofthefollowing:December31,2019December31,2018(Inthousands)CreditFacility:RevolvingCreditFacility..............................$10,000$20,000Amountspayablewithinoneyear..........................—(5,000)$10,000$15,000Futurematuritiesoflong-termdebtareasfollows:YearEndingDecember31,Amount(Inthousands)2020........................................................$—2021........................................................—2022........................................................—2023........................................................10,0002024........................................................—Thereafter....................................................—$10,00063SagaCommunications,Inc.NotestoConsolidatedFinancialStatements5.Long-TermDebt–(continued)OnAugust18,2015,weenteredintoanewcreditfacility(the“CreditFacility”)withJPMorganChaseBank,N.A.,TheHuntingtonNationalBank,CitizensBank,NationalAssociationandJ.P.MorganSecuritiesLLC.InconnectionwiththeexecutionoftheCreditFacility,thecreditagreementinplaceatJune30,2015(the“OldCreditAgreement”)wasterminated,andalloutstandingamountswerepaidinfull.TheCreditFacilityconsistsofa$100millionfive-yearrevolvingfacility(the“RevolvingCreditFacility”)andinitiallymaturedonAugust18,2020.OnJune27,2018,weenteredintoaSecondAmendmenttoourCreditFacility,whichhadfirstbeenamendedonSeptember1,2017,extendingtherevolvingcreditmaturitydateundertheCreditAgreementforfiveyearsafterthedateoftheamendmenttoJune27,2023.OnJuly1,2019,weelectedtoreduceourRevolvingCreditFacilityto$70million.Wehavepledgedsubstantiallyallofourassets(excludingourFCClicensesandcertainotherassets)insupportoftheCreditFacilityandeachofoursubsidiarieshasguaranteedtheCreditFacilityandhaspledgedsubstantiallyalloftheirassets(excludingtheirFCClicensesandcertainotherassets)insupportoftheCreditFacility.Approximately$266,000ofdebtissuancecostsrelatedtotheCreditFacilitywerecapitalizedandarebeingamortizedoverthelifeoftheCreditFacility.Thesedebtissuancecostsareincludedinotherassets,netintheconsolidatedbalancesheets.AsaresultoftheSecondAmendment,weincurredanadditional$120,000oftransactionfeesrelatedtotheCreditFacilitythatwerecapitalized.ThecumulativetransactionfeesarebeingamortizedovertheremaininglifeoftheCreditFacility.InterestratesundertheCreditFacilityarepayable,atouroption,atalternativesequaltoLIBOR(1.75%atDecember31,2019),plus1%to2%orthebaserateplus0%to1%.ThespreadoverLIBORandthebaseratevaryfromtimetotime,dependinguponourfinancialleverage.LetterofcreditissuedundertheCreditFacilitywillbesubjecttoaparticipationfee(whichisequaltotheinterestratesapplicabletoEurocurrencyLoans,asdefinedintheCreditAgreement)payabletoeachoftheLendersandafrontingfeeequalto0.25%perannumpayabletotheissuingbank.Wealsopayquarterlycommitmentfeesof0.2%to0.3%perannumontheunusedportionoftheRevolvingCreditFacility.TheCreditFacilitycontainsanumberoffinancialcovenants(allofwhichwewereincompliancewithatDecember31,2019)which,amongotherthings,requireustomaintainspecifiedfinancialratiosandimposecertainlimitationsonuswithrespecttoinvestments,additionalindebtedness,dividends,distributions,guarantees,liensandencumbrances.OnJune7,2019,weused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofourRevolvingCreditFacility.OnFebruary4,2019,weused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofourRevolvingCreditFacilityanditispresentedincurrentportionoflong-termdebtinourbalancesheetatDecember31,2018.OnSeptember4,2018,weused$5,000,000fromfundsgeneratedbyoperationstovoluntarilypaydownaportionofourRevolvingCreditFacility.Wehadapproximately$60millionofunusedborrowingcapacityundertheRevolvingCreditFacilityatDecember31,2019.64SagaCommunications,Inc.NotestoConsolidatedFinancialStatements6.SupplementalCashFlowInformationYearsEndedDecember31,201920182017(Inthousands)Cashpaidduringtheperiodfor:Interest..........................................$635$884$850Incometaxes......................................$3,893$2,864$2,420Non-cashtransactions:Barterrevenue.....................................$3,560$3,570$3,618Barterexpense.....................................$3,370$3,677$3,367Purchaseoftreasurysharesinconnectionwithexerciseofstockoptions........................................$—$—$826Acquisitionofpropertyandequipment....................$28$11$8Useoftreasurysharesfor401(k)match...................$262$252$2747.IncomeTaxesOnDecember22,2017,theU.S.governmentenactedcomprehensivetaxlegislationcommonlyreferredtoastheTaxCutsandJobsAct(the“TaxAct”).TheTaxActmakesbroadandcomplexchangestotheU.S.taxcode,including,butnotlimitedto,thefollowingthatimpactus:(1)reducingtheU.S.federalcorporateincometaxratefrom35percentto21percent;(2)eliminatingthecorporatealternativeminimumtax(“AMT”)andchanginghowexistingAMTcreditscanberealized;(3)creatinganewlimitationondeductibleinterestexpense;(4)repealingthedomesticproductionactivitiesdeduction;(5)limitingthedeductibilityofcertainexecutivecompensation;and(6)limitingcertainotherdeductions.TheSECstaffissuedStaffAccountingBulletinNo.118(“SAB118”),whichprovidesguidanceonaccountingforthetaxeffectsoftheTaxAct.SAB118providesforameasurementperiodthatshouldnotextendbeyondoneyearfromtheTaxActenactmentdateforcompaniestocompletetheaccountingrelatingtotheTaxActunderASC740.InaccordancewithSAB118,acompanymustreflecttheincometaxeffectsofthoseaspectsoftheTaxActforwhichtheaccountingunderASC740iscomplete.Totheextentthatacompany’saccountingforcertainincometaxeffectsoftheTaxActisincompletebutitisabletodetermineareasonableestimate,itmustrecordaprovisionalestimateinitsfinancialstatements.Ifacompanycannotdetermineaprovisionalestimatetobeincludedinitsfinancialstatements,itshouldcontinuetoapplyASC740onthebasisoftheprovisionsofthetaxlawsthatwereineffectimmediatelybeforetheenactmentoftheTaxAct.AsaresultofourinitialanalysisoftheimpactoftheTaxAct,werecordedaprovisionalamountofnettaxbenefitof$11.5millionin2017relatedtotheremeasurementofourdeferredtaxbalanceandothereffects.WecompletedouraccountingfortheincometaxeffectsoftheTaxActin2018,andnomaterialadjustmentswererequiredtotheprovisionalamountsinitiallyrecorded.65SagaCommunications,Inc.NotestoConsolidatedFinancialStatements7.IncomeTaxes–(continued)Deferredincometaxesreflectthenettaxeffectsoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedforincometaxpurposes.SignificantcomponentsoftheCompany’sdeferredtaxliabilitiesandassetsareasfollows:December31,20192018(Inthousands)Deferredtaxliabilities:Propertyandequipment..................................$5,181$5,145Intangibleassets........................................20,76519,324Prepaidexpenses.......................................376350Totaldeferredtaxliabilities..................................26,32224,819Deferredtaxassets:Allowancefordoubtfulaccounts............................64118Compensation.........................................1,011906Otheraccruedliabilities...................................95631,1701,087Less:valuationallowance...................................——Totalnetdeferredtaxassets.................................1,1701,087Netdeferredtaxliabilities...................................$25,152$23,732Currentportionofdeferredtaxassets..........................$388$303Non-currentportionofdeferredtaxliabilities.....................(25,540)(24,035)Netdeferredtaxliabilities...................................$(25,152)$(23,732)Deferredtaxassetsarerequiredtobereducedbyavaluationallowanceifitismorelikelythannotthatsomeportionorallofthedeferredtaxassetwillnotberealized.AtDecember31,2019andDecember31,2018,wedonothaveavaluationallowancefornetdeferredtaxassets.AtDecember31,2019and2018,netdeferredtaxliabilitiesincludeadeferredtaxassetof$1,170,000and$1,087,000,respectively,relatingtodeferredcompensation,stock-basedcompensationexpense,accruedcompensation,theallowancefordoubtfulaccounts,andotheraccruedexpenses.Thesignificantcomponentsoftheprovisionforincometaxesareasfollows:YearsEndedDecember31,201920182017(Inthousands)Current:Federal..........................................$2,900$2,205$2,545State...........................................1,100835(255)Totalcurrent.......................................4,0003,0402,290Totaldeferred.......................................1,4202,660(8,210)TotalIncomeTaxProvision.............................$5,420$5,700$(5,920)66SagaCommunications,Inc.NotestoConsolidatedFinancialStatements7.IncomeTaxes–(continued)Inaddition,werecognizedataxexpense(benefit)of$0,$0,and($100,000),asaresultofstockoptionexercisesforthedifferencebetweencompensationexpenseforfinancialstatementandincometaxpurposesfortheyearsendedDecember31,2019,2018and2017,respectively.ThereconciliationofincometaxattheU.S.federalstatutorytaxratestoincometaxexpense(benefit)isasfollows:YearsEndedDecember31,201920182017(Inthousands)TaxexpenseatU.S.statutoryrates.......................$3,976$4,017$5,716Statetaxexpense(benefit),netoffederalbenefit..............1,0791,134(769)Other,net.........................................365549633Federaltaxreform–deferredtaxratechange................——(11,500)$5,420$5,700$(5,920)The2019and2018effectivetaxratesexceedthefederalstatutoryrateprimarilyduetostateincometaxes.The2017effectivetaxratediffersfromthefederalstatutoryrateprimarilyduetotheimpactsoftheTaxActandstateincometaxbenefiton2017’searnings.TheCompanyfilesincometaxesintheU.S.federaljurisdiction,andinvariousstateandlocaljurisdictions.TheCompanyisnolongersubjecttoU.S.federalexaminationsbytheInternalRevenueService(IRS)foryearspriorto2016.Duringthefirstquarterof2015,theIRScommencedanexaminationoftheCompany’s2013U.S.federalincometaxreturnwhichwascompletedinthefirstquarterof2016andresultedinnochangestothereturn.TheCompanyissubjecttoexaminationforincomeandnon-incometaxfilingsinvariousstates.AsofDecember31,2019,and2018therewerenoaccruedbalancesrecordedrelatedtouncertaintaxpositions.Weclassifyincometax-relatedinterestandpenaltiesthatarerelatedtoincometaxliabilitiesasacomponentofincometaxexpense.FortheyearsendedDecember31,2019,2018and2017,wehad$2,100,$31,000,and$0,respectively,tax-relatedinterestandpenaltiesandhad$0accruedatDecember31,2019and2018.8.Stock-BasedCompensation2005IncentiveCompensationPlanOnOctober16,2013ourstockholdersapprovedtheSecondAmendedandRestatedSagaCommunications,Inc.2005IncentiveCompensationPlan,whichwasamendedin2018afterapprovaloftheamendmentbyourstockholdersatour2018annualmeeting(asamended,the“SecondRestated2005Plan”).The2005IncentiveCompensationPlan,whichreplacedour2003StockOptionPlan,wasfirstapprovedbystockholdersin2005andsubsequentlythisplanwasre-approvedbystockholdersin2010.Thechangesmadein2013intheSecondRestated2005Plan(i)increasedthenumberofauthorizedsharesby233,334sharesofCommonStock,(ii)extendedthedateformakingawardstoSeptember6,2018,(iii)includeddirectorsasparticipants,(iv)targetedawardsaccordingtogroupingsofparticipantsbasedonrangesofbasesalaryofemployeesand/orretainersofdirectors,(v)requiredparticipantstoretain50%oftheirnetannualrestrictedstockawardsduringtheiremploymentorserviceasadirector,and(vi)includedaclawbackprovision.The2018amendmenttotheSecondRestated2005Plan(i)extendedthedateformakingawardstoSeptember6,2023and(ii)increasedthenumberofauthorizedsharesunderthePlanby90,000sharesof67SagaCommunications,Inc.NotestoConsolidatedFinancialStatements8.Stock-BasedCompensation–(continued)ClassBCommonStock.TheSecondRestated2005Planallowsforthegrantingofrestrictedstock,restrictedstockunits,incentivestockoptions,nonqualifiedstockoptions,andperformanceawardstoeligibleemployeesandnon-employeedirectors.ThenumberofsharesofCommonStockthatmaybeissuedundertheSecondRestated2005Planmaynotexceed370,000sharesofClassBCommonStock,990,000sharesofClassACommonStockofwhichupto620,000sharesofClassACommonStockmaybeissuedpursuanttoincentivestockoptionsand370,000ClassACommonStockissuableuponconversionofClassBCommonStock.AwardsdenominatedinClassACommonStockmaybegrantedtoanyemployeeordirectorundertheSecondRestated2005Plan.However,awardsdenominatedinClassBCommonStockmayonlybegrantedtoEdwardK.Christian,President,ChiefExecutiveOfficer,ChairmanoftheBoardofDirectors,andtheholderof100%oftheoutstandingClassBCommonStockoftheCompany.StockoptionsgrantedundertheSecondRestated2005Planmaybefortermsnotexceedingtenyearsfromthedateofgrantandmaynotbeexercisedatapricewhichislessthan100%ofthefairmarketvalueofsharesatthedateofgrant.Stock-BasedCompensationOurstock-basedcompensationexpenseismeasuredandrecognizedforallstock-basedawardstoemployeesusingtheestimatedfairvalueoftheaward.Compensationexpenseisrecognizedovertheperiodduringwhichanemployeeisrequiredtoprovideserviceinexchangefortheaward.Fortheseawards,wehaverecognizedcompensationexpenseusingastraight-lineamortizationmethod.Accountingguidancerequiresthatstock-basedcompensationexpensebebasedonawardsthatareultimatelyexpectedtovest;thereforestock-basedcompensationhasbeenadjustedforestimatedforfeitures.Whenestimatingforfeitures,weconsidervoluntaryterminationbehaviorsaswellastrendsofactualoptionforfeitures.AllstockoptionswerefullyvestedandexpensedatDecember31,2012,thereforetherewasnocompensationexpenserelatedtostockoptionsfortheyearsendedDecember31,2019,2018and2017.WecalculatedthefairvalueofeachoptionawardonthedateofgrantusingtheBlack-Scholesoptionpricingmodel.Theestimatedexpectedvolatility,expectedtermofoptionsandestimatedannualforfeiturerateweredeterminedbasedonhistoricalexperienceofsimilarawards,givingconsiderationtothecontractualtermsofthestock-basedawards,vestingschedulesandexpectationsoffutureemployeebehavior.Therisk-freeinterestratewasbasedontheU.S.Treasuryyieldcurveineffectatthetimeofgrant.68SagaCommunications,Inc.NotestoConsolidatedFinancialStatements8.Stock-BasedCompensation–(continued)ThefollowingsummarizesthestockoptiontransactionsfortheSecondRestated2005Plan,andthe2003PlanfortheyearendedDecember31:NumberofOptionsWeightedAverageExercisePriceWeightedAverageRemainingContractualTerm(Years)AggregateIntrinsicValueOutstandingatJanuary1,2017...........29,035$28.470.4$633,834Granted............................——Exercised...........................(29,035)28.47Forfeited/canceled/expired...............——OutstandingatDecember31,2017.........—$——$—Granted............................——Exercised...........................——Forfeited/canceled/expired...............——OutstandingatDecember31,2018.........—$——$—Granted............................——Exercised...........................——Forfeited/canceled/expired...............——OutstandingatDecember31,2019.........—$——$—VestedandExercisableatDecember31,2019..—$——$—ThetotalintrinsicvalueofstockoptionsexercisedduringtheyearsendedDecember31,2019,2018and2017was$0,$0,and$664,321,respectively.CashreceivedfromstockoptionsexercisedduringtheyearsendedDecember31,2019,2018and2017was$0,$0and$354,respectively.Therewerenooptionsgrantedduring2019,2018and2017andtherewerenostockoptionsoutstandingasofDecember31,2019.ThefollowingsummarizestherestrictedstocktransactionsfortheyearendedDecember31:SharesWeightedAverageGrantDateFairValueOutstandingatJanuary1,2017...............................103,262$43.73Granted...............................................48,78044.20Vested.................................................(54,598)42.13Forfeited/canceled/expired...................................(805)46.23OutstandingatDecember31,2017.............................96,639$44.85Granted...............................................63,81137.37Vested.................................................(49,493)43.98Forfeited/canceled/expired...................................(1,781)45.39OutstandingatDecember31,2018.............................109,176$40.87Granted...............................................72,98531.18Vested.................................................(51,021)42.66Forfeited/canceled/expired...................................(2,916)40.30Non-vestedandoutstandingatDecember31,2019.................128,224$34.66Weightedaverageremainingcontractuallife(inyears)...............2.269SagaCommunications,Inc.NotestoConsolidatedFinancialStatements8.Stock-BasedCompensation–(continued)Theweightedaveragegrantdatefairvalueofrestrictedstockthatvestedduring2019,2018and2017was$2,276,000,$2,385,000and$2,300,000,respectively.Thenetvalueofunrecognizedcompensationcostrelatedtounvestedrestrictedstockawardsaggregated$4,195,000,$4,166,000and$4,063,000atDecember31,2019,2018and2017,respectively.FortheyearsendedDecember31,2019,2018and2017wehad$2,129,000,$2,201,000and$2,279,000,respectively,oftotalcompensationexpenserelatedtorestrictedstock-basedarrangements.Theexpenseisincludedincorporategeneralandadministrativeexpensesinourresultsofoperations.TheassociatedtaxbenefitrecognizedfortheyearsendedDecember31,2019,2018and2017was$227,000,$251,000and$912,000,respectively.9.EmployeeBenefitPlans401(k)PlanWehaveadefinedcontributionpensionplan(“401(k)Plan”)thatcoverssubstantiallyallemployees.Employeescanelecttohaveaportionoftheirwageswithheldandcontributedtotheplan.The401(k)Planalsoallowsustomakeadiscretionarycontribution.Totaladministrativeexpenseunderthe401(k)Planwas$2,400,$1,100and$1,700in2019,2018and2017,respectively.TheCompany’sdiscretionarycontributiontotheplanwasapproximately$250,000,$265,000and$255,000fortheyearsendedDecember31,2019,2018and2017,respectively.DeferredCompensationPlanIn1999weestablishedaNonqualifiedDeferredCompensationPlanwhichallowsofficersandcertainmanagementemployeestoannuallyelecttodeferaportionoftheircompensation,onapre-taxbasis,untiltheirretirement.Theretirementbenefittobeprovidedisbasedontheamountofcompensationdeferredandanyearningsthereon.DeferredcompensationexpensefortheyearsendedDecember31,2019,2018and2017was$135,000,$149,000and$211,000,respectively.Weinvestincompany-ownedlifeinsurancepoliciestoassistinfundingtheseprograms.Thecashsurrendervaluesofthesepoliciesareinarabbitrustandarerecordedasourassets.SplitDollarOfficerLifeInsuranceWeprovidesplitdollarinsurancebenefitstocertainexecutiveofficersandrecordsanassetequaltothecumulativepremiumspaidontherelatedpolicies,aswewillfullyrecoverthesepremiumsunderthetermsoftheplan.Weretainacollateralassignmentofthecashsurrendervaluesandpolicydeathbenefitspayabletoinsurerecoveryofthesepremiums.10.AcquisitionsandDispositionsWeactivelyseekandexploreopportunitiesforexpansionthroughtheacquisitionofadditionalbroadcastproperties.Theconsolidatedstatementsofincomeincludetheoperatingresultsoftheacquiredstationsfromtheirrespectivedatesofacquisition.Allacquisitionswereaccountedforaspurchasesand,accordingly,thetotalpurchaseconsiderationwasallocatedtotheacquiredassetsandassumedliabilitiesbasedontheirestimatedfairvaluesasoftheacquisitiondates.Theexcessoftheconsiderationpaidovertheestimatedfairvalueofnetassetsacquiredhavebeenrecordedasgoodwill.TheCompanyaccountsforacquisitionundertheprovisionsofFASBASCTopic805,BusinessCombinations.Managementassignedfairvaluestotheacquiredpropertyandequipmentthroughacombinationofcostandmarketapproachesbaseduponeachspecificasset’sreplacementcost,withaprovisionfordepreciation,andtotheacquiredintangibles,primarilyanFCClicense,basedontheGreenfieldvaluationmethodology,adiscountedcashflowapproach.70SagaCommunications,Inc.NotestoConsolidatedFinancialStatements10.AcquisitionsandDispositions–(continued)2019AcquisitionsOnJanuary9,2019,weclosedonanagreementtopurchaseWPVQ-AMandW222CHfromCountyBroadcastingCompany,LLCforanaggregatepurchasepriceof$210thousand.ManagementattributesthegoodwillrecognizedintheacquisitiontothepoweroftheexistingbrandsintheGreenfield,Massachusettsmarketaswellassynergiesandgrowthopportunitiesexpectedthroughthecombinationwithourexistingstations.2018AcquisitionsOnOctober29,2018,weenteredintoanagreementtopurchaseWOGK-FM,WNDT-FM,WNDD-FMandWNDN-FM,fromOcalaBroadcastingCorporation,LLCforanaggregatepurchasepriceof$9.3million,subjecttocertainpurchasepriceadjustments.WeclosedthistransactioneffectiveDecember31,2018usingfundsgeneratedfromoperationsof$9.84million,whichincludedthepurchasepriceof$9.3million,thepurchaseof$566thousandinaccountsreceivablebycertainclosingadjustmentsandtransactionalcostsofapproximately$25thousand,ofwhich$553thousandwaspaidinJanuary2019.ManagementattributesthegoodwillrecognizedintheacquisitiontothepoweroftheexistingbrandsintheOcala,Floridamarketaswellassynergiesandgrowthopportunitiesexpectedthroughthecombinationwithourexistingstations.CondensedConsolidatedBalanceSheetof2019and2018Acquisitions:Thefollowingcondensedbalancesheetsrepresenttheestimatedfairvalueassignedtotherelatedassetsandliabilitiesofthe2019and2018acquisitionsattheirrespectiveacquisitiondates.CondensedConsolidatedBalanceSheetof2019and2018AcquisitionsAcquisitionsin20192018(Inthousands)AssetsAcquired:Currentassets......................................................$—$559Propertyandequipment..............................................253,007Otherassets:Broadcastlicenses.................................................611,991Goodwill.......................................................1243,281Otherintangibles,deferredcostsandinvestments...........................—1,123Totalotherassets...................................................1856,395Totalassetsacquired.................................................2109,961LiabilitiesAssumed:Currentliabilities...................................................—120Totalliabilitiesassumed...............................................—120Netassetsacquired..................................................$210$9,841ProFormaResultsofOperationsforAcquisitions(Unaudited)ThefollowingunauditedproformaresultsofouroperationsfortheyearsendedDecember31,2019and2018assumethe2019and2018acquisitionsoccurredasofJanuary1,2018.Thetranslatorsarestart-upstationsandtherefore,havenoproformarevenueandexpenses.Theproformaresultsgiveeffecttocertain71SagaCommunications,Inc.NotestoConsolidatedFinancialStatements10.AcquisitionsandDispositions–(continued)adjustments,includingdepreciation,amortizationofintangibleassets,increasedinterestexpenseonacquisitiondebtandrelatedincometaxeffects.Theproformaresultshavebeenpreparedforcomparativepurposesonlyanddonotpurporttoindicatetheresultsofoperationswhichwouldactuallyhaveoccurredhadthecombinationsbeenineffectonthedatesindicatedorwhichmayoccurinthefuture.YearsEndedDecember31,20192018(Inthousands,exceptpersharedata)ProformaConsolidatedResultsofOperationsNetoperatingrevenue..................................$123,072$129,228Stationoperatingexpense................................92,69297,314Corporategeneralandadministrative........................11,46011,359Otheroperatingexpenses................................11261Operatingincome.....................................18,80820,494Interestexpense.......................................735946Interestincome.......................................(610)(631)Otherincome........................................(16)(23)Incomebeforeincometaxexpense..........................18,69920,202Incometaxexpense(benefit)expense........................5,4205,944Netincome..........................................$13,279$14,258Basicearningspershare.................................$2.23$2.40Dilutedearningspershare...............................$2.23$2.4011.RelatedPartyTransactionsPrincipalStockholderEmploymentAgreementInJune2011,weenteredintoanewemploymentagreementwithEdwardK.Christian,Chairman,PresidentandCEO,whichbecameeffectiveasofJune1,2011,andreplacesandsupersedeshisprioremploymentagreement.WeenteredintoamendmentstotheagreementonFebruary12,2016(the“FirstAmendment”)andFebruary26,2019(the“SecondAmendment”).TheFirstAmendmentextendedthetermoftheemploymentagreementtoMarch31,2021.TheFirstAmendmentalsostatesthatoneachanniversaryoftheeffectivedateoftheemploymentagreement,theCompensationcommitteeshalldetermineinitsdiscretiontheamountofanyannualincreases(whichshallnotbelessthanthegreaterof4%oradefinedcostoflivingincrease).Mr.Christianmaydeferanyorallofhisannualsalary.TheSecondAmendmentextendsthetermoftheemploymentagreementfromMarch31,2021toMarch31,2025andalsomakescertainclarifyingmodificationstotheemploymentagreement.Undertheagreement,Mr.Christianiseligiblefordiscretionaryandperformancebonuses,stockoptionsand/orstockgrantsinamountsdeterminedbytheCompensationCommitteeandwillcontinuetoparticipateinourbenefitplan.Wewillmaintaininsurancepolicies,willfurnishanautomobile,willpayforanexecutivemedicalplanandwillmaintainanofficeforMr.ChristianatitsprincipalexecutiveofficesandinSarasotaCounty,Florida.TheFirstAmendmentaddsthatweareauthorizedtopayforMr.Christian’staxpreparationservicesonanannualbasisandthatthisamountwillbesubjecttoincometaxasadditionalcompensation.TheagreementprovidescertainpaymentstoMr.Christianintheeventofhisdisability,deathorachangeincontrol.Uponachangeincontrol,Mr.Christianmayterminatehisemployment.The72SagaCommunications,Inc.NotestoConsolidatedFinancialStatements11.RelatedPartyTransactions–(continued)agreementalsoprovidesgenerallythat,uponachangeincontrol,wewillpayMr.Christiananamountequalto2.99timestheaverageofhistotalannualsalaryandbonusesforeachofthethreeimmediatelyprecedingperiodsoftwelveconsecutivemonths,plusanadditionalamountfortaxliabilities,relatedtothepayment.ForthethreeyearsendedDecember31,2019Mr.Christian’saverageannualcompensation,asdefinedbytheemploymentagreement,wasapproximately$1,889,000.Inaddition,ifMr.Christian’semploymentisterminatedforanyreason,otherthanforcause,wewillcontinuetoprovidehealthinsuranceandmedicalreimbursementandmaintainexistinglifeinsurancepoliciesforaperiodoftenyears,andthecurrentsplitdollarlifeinsurancepolicyshallbetransferredtoMr.Christianandhiswife,andweshallreimburseMr.Christianforanytaxconsequencesofsuchtransfer.TheagreementcontainsacovenantnottocompeterestrictingMr.Christianfromcompetingwithusinanyofourmarketsifhevoluntarilyterminateshisemploymentwithusoristerminatedforcause,forathreeyearperiodthereafter.ThefirstamendmentalsoentitlesMr.Christiantoreceiveseverancepayequalto100%ofhisthenbasesalaryfor24monthspayableinequalmonthlyinstallmentsandafterthedateuponwhichnoticeofterminationisgiven,anyunvestedortime-vestedstockoptionspreviouslygrantedtoMr.Christianbyusshallbecomeimmediatelyonehundredpercent(100%)vestedtotheextentpermittedbylaw.OnDecember5,2017,Mr.Christianagreedtodeferapproximately$100,000ofhis2018salarywhichwaspaid100%onJanuary4,2019.OnDecember14,2018,Mr.Christianagreedtodeferapproximately$100,000ofhis2019salarytobepaid100%onJanuary3,2020.OnDecember6,2019,Mr.Christianagreedtodeferapproximately$100,000ofhis2020salarytobepaid100%onJanuary15,2021.ChangeinControlAgreementsInDecember2007,SamuelD.Bush,SeniorVicePresidentandChiefFinancialOfficer,MarciaK.Lobaito,SeniorVicePresident,CorporateSecretaryandDirectorofBusinessAffairs,andCatherineBobinski,SeniorVicePresident/Finance,ChiefAccountingOfficerandCorporateController,enteredintoChangeinControlAgreements.InSeptember2018,ChristopherS.Forgy,SeniorVicePresidentofOperationsenteredintoaChangeinControlAgreement.Achangeincontrolisdefinedtomeantheoccurrenceof(a)anypersonorgroupbecomingthebeneficialowner,directlyorindirectly,ofmorethan30%ofthecombinedvotingpoweroftheCompany’sthenoutstandingsecuritiesandMr.ChristianceasingtobeChairmanandCEOoftheCompany;(b)theconsummationofamergerorconsolidationoftheCompanywithanyothercorporation,otherthanamergerorconsolidationwhichresultsinthevotingsecuritiesoftheCompanyoutstandingimmediatelypriortheretocontinuingtorepresentmorethan50%ofthecombinedvotingsecuritiesoftheCompanyorsuchsurvivingentity;or(c)theapprovalofthestockholdersoftheCompanyofaplanofcompleteliquidationoftheCompanyoranagreementforthesaleordispositionbytheCompanyofallorsubstantiallyallofitsassets.Ifthereisachangeincontrol,theCompanyshallpayalumpsumpaymentwithin45daysthereofof1.5timestheaverageoftheexecutive’slastthreefullcalendaryearsofsuchexecutive’sbasesalaryandanyannualcashbonuspaid.Intheeventthatsuchpaymentconstitutesa“parachutepayment”withinthemeaningofSection280GsubjecttoanexcisetaximposedbySection4999oftheInternalRevenueCode,theCompanyshallpaytheexecutiveanadditionalamountsothattheexecutivewillreceivetheentireamountofthelumpsumpaymentbeforedeductionforfederal,stateandlocalincometaxandpayrolltax.Intheeventofachangeincontrol(otherthantheapprovalofplanofliquidation),theCompanyorthesurvivingentitymayrequireasaconditiontoreceiptofpaymentthattheexecutivecontinueinemploymentforaperiodofuptosixmonthsafterconsummationofthechangeincontrol.Duringsuchsixmonths,executivewillcontinuetoearnhispre-existingsalaryandbenefits.Insuchcase,theexecutiveshallbepaidthelumpsumpaymentuponcompletionofthecontinuedemployment.If,however,theexecutivefailstoremainemployedduringthisperiodofcontinuedemploymentforanyreasonotherthan(a)terminationwithoutcausebytheCompanyorthesurvivingentity,(b)death,(c)disabilityor(d)breachoftheagreementbytheCompanyorthesurvivingentity,thenexecutiveshallnotbepaidthelumpsumpayment.Inaddition,if73SagaCommunications,Inc.NotestoConsolidatedFinancialStatements11.RelatedPartyTransactions–(continued)theexecutive’semploymentisterminatedbytheCompanywithoutcausewithinsixmonthspriortotheconsummationofachangeincontrol,thentheexecutiveshallbepaidthelumpsumpaymentwithin45daysofsuchchangeincontrol.TransactionswithAffiliateandOtherRelatedPartyTransactionsUntiltheTelevisionSale(discussedinNote4)SurtseyMedia,LLC(“SurtseyMedia”)ownedtheassetsoftelevisionstationKVCTinVictoria,Texas.SurtseyMediaisamulti-mediacompany100%-ownedbythedaughterofMr.Christian,ourPresident,ChiefExecutiveOfficerandChairman.WeoperatedKVCTunderaTimeBrokerageAgreement(“TBA”)withSurtseyMediawhichweenteredintoinMay1999.UndertheFCC’sownershiprules,wewereprohibitedfromowningorhavinganattributableorcognizableinterestinthisstation.InJanuary2012,theTBAwasamended.Pursuanttotheamendment,(i)thetermwasextendednineyearscommencingfromJune1,2013,withrightstoextendfortwoadditionaleightyearterms,(ii)wepaidSurtseyMediaanextensionfeeof$27,950uponexecutionoftheamendment,(iii)themonthlyfees,payabletoSurtseyMediawereincreasedforeachextensionperiod,and(iv)wehadanexclusiveoption,whiletheTBAwasineffect,topurchasealloftheassetsofstationKVCT,subjecttocertainconditions,basedonaformula.UndertheamendedTBA,priortotheTelevisionSale,during2017,wepaidSurtseyMediafeesofapproximately$3,800permonth,plusaccountingfeesandreimbursementofexpensesactuallyincurredinoperatingthestation.TheTBAwasterminatedatthetimeofthecompletionoftheTelevisionSaleofSeptember1,2017.InMarch2003,weenteredintoanagreementofunderstandingwithSurtseyMediawherebywehadguaranteedupto$1,250,000ofthedebtincurred,inSurtseyMediaclosingtheacquisitionofaconstructionpermitforKFJX-TVstationinPittsburg,Kansas,afullpowerFoxaffiliateservingJoplin,Missouri.Inconsiderationfortheguarantee,SurtseyMediaenteredintovariousagreementswithusrelatingtothestation,includingaSharedServicesAgreement,TechnicalServicesAgreement,andAgreementfortheSaleofCommercialTimeandBrokerAgreement(the“StationAgreements”).ThestationwentontheairforthefirsttimeonOctober18,2003.UndertheFCC’sownershipruleswewereprohibitedfromowningorhavinganattributableorcognizableinterestinthisstation.InJanuary2012,theStationAgreementswereamended.Pursuanttotheamendment,(i)theBrokerAgreementandtheTechnicalServicesAgreementwereterminated,(ii)thetermsofthecontinuingStationAgreementswereextendednineyearscommencingfromJune1,2013,withrightstoextendfortwoadditionaleightyearterms,(iii)wepaidSurtseyMedia$37,050uponexecutionoftheamendment,(iv)themonthlyfeespayabletoSurtseyMediawereincreasedforeachextensionperiod,and(v)wehadanexclusiveoption,whiletheAgreementfortheSaleofCommercialTimeandSharedServicesAgreementwereineffect,topurchasealloftheassetsofStationKFJXsubjecttocertainconditions,basedonaformula,togetherwithapaymentof$1.2million.UndertheamendedStationAgreements,priortotheTelevisionSale,during2017wepaidfeesofapproximately$5,200,permonth,plusaccountingfeesandreimbursementofexpensesactuallyincurredinoperatingthestation.WegenerallyprepaidSurtseyquarterlyforitsestimatedexpenses.AspartofcompletionoftheTelevisionSale,thedebtweguaranteedwaspaidinfullandtheamendedStationAgreementswereterminated.SurtseyProductions,Inc.,theparentcompanyofSurtseyMedia,leasedofficespaceinabuildingownedbyus,andpaidusrentof$3,000duringthefirsteightmonthsoftheyearendedDecember31,2017priortotheTelevisionSale.SagaQuadStates,ourfullyownedsubsidiary,completedtheacquisitionfromApexMediaCorporation,aSouthCarolinacorporation(“AMC”),andPearceDevelopment,LLCf/k/aApexRealProperty,LLC,aSouthCarolinalimitedliabilitycompany(“ARP”andtogetherwithAMC,“Seller”),ofsubstantiallyallofSeller’sassetsrelatedtotheoperationofcertainradioandtranslatorstations,uponthesatisfactionofcertainclosingconditionsdescribedintheAssetPurchaseAgreementdatedMay9,2017(the“ApexAgreement”)byandamongSeller,SagaQuadStates,and,solelyinhisroleasguarantorundertheApexAgreement,G.DeanPearce,asfurtherdescribedintheForm8-KfiledbySagaonMay10,2017.Mr.Pearce74SagaCommunications,Inc.NotestoConsolidatedFinancialStatements11.RelatedPartyTransactions–(continued)isPresidentofAMCandARP,andcurrentlyservesontheBoardofDirectorsofSaga.ThepurchasepriceundertheApexAgreementwas$23,000,000,subjecttocertainpurchasepriceadjustments,payableincash.Thepurchasepricewasdeterminedthrougharm’s-lengthnegotiations,andwasapprovedbytheSagaBoard,andFinanceandAuditCommittee,inaccordancewiththerequirementsofSaga’sCorporateGovernanceGuidelinesforthereviewofrelatedpartytransactions.Inconnectionwiththisagreement,wereceived500hoursofservicefromNewPointeSystems,asubsidiaryofPearceDevelopmentandhaveagreedtoprovide1,000,30second,spotsofairtimetoPearceDevelopment.AsofDecember31,2019,wehaveusedthehoursofservicefromNewPointeSystems,andwehaveapproximately1,000,30secondspotslefttoprovidetoPearceDevelopment.During2019,2018and2017,wealsopaidapproximately$4,400,$4,100and$3,300rentpermonth,respectivelytoPearceDevelopmentforourHiltonHeadstudioandofficespacebeginningSeptember1,2017.EffectiveJune19,2019,weemployedEricChristian,sonofEdwardK.Christian,ourPresident,CEOandChairman,asourDirectorofSolutionArchitecture.TheAuditCommitteeapprovedtheemploymentofMr.Christian.12.CommonStockDividends.StockholdersareentitledtoreceivesuchdividendsasmaybedeclaredbyourBoardofDirectorsoutoffundslegallyavailableforsuchpurpose.However,nodividendmaybedeclaredorpaidincashorpropertyonanyshareofanyclassofCommonStockunlesssimultaneouslythesamedividendisdeclaredorpaidoneachshareoftheotherclassofcommonstock.Inthecaseofanystockdividend,holdersofClassACommonStockareentitledtoreceivethesamepercentagedividend(payableinsharesofClassACommonStock)astheholdersofClassBCommonStockreceive(payableinsharesofClassBCommonStock).VotingRights.HoldersofsharesofCommonStockvoteasasingleclassonallmatterssubmittedtoavoteofthestockholders,witheachshareofClassACommonStockentitledtoonevoteandeachshareofClassBCommonStockentitledtotenvotes,except(i)intheelectionfordirectors,(ii)withrespecttoany“goingprivate”transactionbetweentheCompanyandtheprincipalstockholder,and(iii)asotherwiseprovidedbylaw.Intheelectionofdirectors,theholdersofClassACommonStock,votingasaseparateclass,areentitledtoelecttwenty-fivepercent,ortwo,ofourdirectors.TheholdersoftheCommonStock,votingasasingleclasswitheachshareofClassACommonStockentitledtoonevoteandeachshareofClassBCommonStockentitledtotenvotes,areentitledtoelecttheremainingdirectors.TheBoardofDirectorsconsistedofsevenmembersatDecember31,2019.HoldersofCommonStockarenotentitledtocumulativevotingintheelectionofdirectors.TheholdersoftheCommonStockvoteasasingleclasswithrespecttoanyproposed“goingprivate”transactionwiththeprincipalstockholderoranaffiliateoftheprincipalstockholder,witheachshareofeachclassofCommonStockentitledtoonevotepershare.UnderDelawarelaw,theaffirmativevoteoftheholdersofamajorityoftheoutstandingsharesofanyclassofcommonstockisrequiredtoapprove,amongotherthings,achangeinthedesignations,preferencesandlimitationsofthesharesofsuchclassofcommonstock.LiquidationRights.Uponourliquidation,dissolution,orwinding-up,theholdersofClassACommonStockareentitledtoshareratablywiththeholdersofClassBCommonStockinaccordancewiththenumberofsharesheldinallassetsavailablefordistributionafterpaymentinfullofcreditors.Inanymerger,consolidation,orbusinesscombination,theconsiderationtobereceivedpersharebytheholdersofClassACommonStockandClassBCommonStockmustbeidenticalforeachclassof75SagaCommunications,Inc.NotestoConsolidatedFinancialStatements12.CommonStock–(continued)stock,exceptthatinanysuchtransactioninwhichsharesofcommonstockaretobedistributed,suchsharesmaydifferastovotingrightstotheextentthatvotingrightsnowdifferamongtheClassACommonStockandtheClassBCommonStock.OtherProvisions.EachshareofClassBCommonStockisconvertible,attheoptionofitsholder,intooneshareofClassACommonStockatanytime.OneshareofClassBCommonStockconvertsautomaticallyintooneshareofClassACommonStockuponitssaleorothertransfertoapartyunaffiliatedwiththeprincipalstockholderor,intheeventofatransfertoanaffiliatedparty,uponthedeathofthetransferor.13.CommitmentsandContingenciesLeasesWeleasecertainland,buildingsandequipmentforuseinouroperations.Werecognizeleaseexpensefortheseleasesonastraight-linebasisovertheleasetermandcombineleaseandnon-leasecomponentsforallleases.Right-of-use(“ROU”)assetsandleaseliabilitiesarerecordedonthebalancesheetforallleaseswithanexpectedtermofatleastoneyear.Someleasesincludeoneormoreoptionstorenew.Theexerciseofleaserenewaloptionsisgenerallyatourdiscretion.ThedepreciablelivesofROUassetsarelimitedtotheexpectedleaseterm.Ourleaseagreementsdonotcontainanyresidualvalueguaranteesormaterialrestrictivecovenants.AsofDecember31,2019,wedonothaveanynon-cancellableoperatingleasecommitmentsthathavenotyetcommenced.ROUassetsareclassifiedwithinotherintangibles,deferredcostsandinvestments,netonthecondensedconsolidatedbalancesheetwhilecurrentleaseliabilitiesareclassifiedwithinotheraccruedexpensesandlong-termleaseliabilitiesareclassifiedwithinotherliabilities.Leaseswithaninitialtermof12monthsorlessarenotrecordedonthebalancesheet.ROUassetsandleaseliabilitieswere$6.9millionand$7.0millionatDecember31,2019,respectively.PaymentsonleaseliabilitiesduringtheyearendedDecember31,2019totaled$1,682,000.Leaseexpenseincludescostforleaseswithtermsinexcessofoneyear.FortheyearsendedDecember31,2019,2018and2017,ourtotalleaseexpensewas$1,801,000,$1,603,000and$1,558,000,respectively.Short-termleasecostsaredeminimus.Wehavenofinancingleasesandminimumannualrentalcommitmentsundernon-cancellableoperatingleasesconsistedofthefollowingatDecember31,2019(inthousands):YearsEndingDecember31,2020...........................................................$1,6892021...........................................................1,6352022...........................................................1,4562023...........................................................1,1222024...........................................................787Thereafter.......................................................1,504Totalleasepayments(a)..............................................8,193Less:Interest(b)...................................................1,196Presentvalueofleaseliabilities(c).......................................$6,997(a)Leasepaymentsincludeoptionstoextendleasetermsthatarereasonablycertainofbeingexercised.TherewerenolegallybindingminimumleasepaymentsforleasessignedbutnotyetcommencedatDecember31,2019.76SagaCommunications,Inc.NotestoConsolidatedFinancialStatements13.CommitmentsandContingencies–(continued)(b)Ourleasesdonotprovideareadilydeterminableimplicitrate.Therefore,wemustestimateourdiscountrateforsuchleasestodeterminethepresentvalueofleasepaymentsattheleasecommencementdate.(c)Theweightedaverageremainingleasetermandweightedaveragediscountrateusedincalculatingourleaseliabilitieswere6.6yearsand4.6%,respectively,atDecember31,2019.PerformanceFeesWeincurfeesfromperformingrightsorganizations(“PRO”)tolicenseourpublicperformanceofthemusicalworkscontainedineachPRO’srepertory.TheRadioMusicLicensingCommittee,ofwhichwearearepresentedparticipant,(1)enteredintoanindustry-widesettlementwithAmericanSocietyofComposers,AuthorsandPublishersthatwaseffectiveJanuary1,2017forafive-yearterm;(2)iscurrentlyseekingreasonableindustry-widefeesfromBroadcastMusic,Inc.effectiveJanuary1,2017;(3)reachedanagreementwiththeSocietyofEuropeanStageAuthorsandComposersthatisretroactivetoJanuary1,2016;and(4)filedinNovember2016amotionintheU.S.DistrictCourtinPennsylvaniaagainstGlobalMusicRights(“GMR”)arguingthatGMRisamonopolydemandingmonopolypricesandaskingtheCourttosubjectGMRtoanantitrustconsentdecree.InJanuary2017,weobtainedaninterimlicensefromGMRforfeeseffectiveJanuary1,2017toavoidanyinfringementclaimsbyGMRforusingGMR’srepertorywithoutalicense.ContingenciesIn2003,inconnectionwithouracquisitionofoneFMradiostation,WJZK-FMservingtheColumbus,Ohiomarket,weenteredintoanagreementwherebywewouldpaytheselleruptoanadditional$1,000,000ifweobtainapprovalfromtheFCCforacityoflicensechange.14.FairValueMeasurementsAsdefinedinASCTopic820,fairvalueisdefinedasthepricethatwouldbereceivedfromsellinganassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Toincreasethecomparabilityoffairvaluemeasures,thefollowinghierarchyprioritizestheinputstovaluationmethodologiesusedtomeasurefairvalue:Level1—Quotedpricesinactivemarketsforidenticalassetsorliabilities.Level2—Observableinputsotherthanquotedpricesinactivemarketsforidenticalassetsandliabilities,quotedpricesforidenticalorsimilarassetsorliabilitiesinmarketsthatarenotactive,orotherinputsthatareobservableorcanbecorroboratedbyobservablemarketdata.Level3—Unobservableinputsinwhichthereislittleornomarketdataavailable,whichrequiresmanagementtodevelopitsownassumptionsinpricingtheassetorliability.Ourassetsandliabilitiesdisclosedatfairvaluearesummarizedbelow($000’somitted):FairValueFinancialInstrumentFairValueHierarchyDecember31,2019December31,2018Cashandcashequivalents........................Level1$44,034$44,729RevolvingCreditFacility........................Level210,00020,000Ourfinancialinstrumentsarecomprisedofcashandcashequivalents,andlong-termdebt.Thecarryingvalueofcashandcashequivalentsapproximatefairvalueduetotheirshortmaturities.Thefair77SagaCommunications,Inc.NotestoConsolidatedFinancialStatements14.FairValueMeasurements–(continued)valueofcashandcashequivalentsisderivedfromquotedmarketpricesandareconsideredalevel1.InterestontheCreditFacilityisatavariablerate,andassuchthedebtobligationoutstandingapproximatesfairvalueandisconsideredalevel2.Non-RecurringFairValueMeasurementsWehavecertainassetsthataremeasuredatfairvalueonanon-recurringbasisunderthecircumstancesandeventsdescribedinNote3—BroadcastLicenses,GoodwillandOtherIntangibles,andareadjustedtofairvalueonlywhenthecarryingvaluesaremorethanthefairvalues.Duringthefourthquarterof2019,wereviewedthefairvalueoftheassetsthataremeasuredatfairvalueonanon-recurringbasisandconcludedthattheseassetswerenotimpairedasthefairvalueoftheseassetsequaledorexceededtheircarryingvalues.Duringthefourthquarterof2018,wereviewedthefairvalueoftheassetsthataremeasuredatfairvalueonanon-recurringbasisandconcludedthattheseassetswerenotimpairedasthefairvalueoftheseassetsequaledorexceededtheircarryingvalues.Duringthefourthquarterof2017,asaresultofourannualimpairmenttest,wewrotedownbroadcastlicenseswithacarryingvalueof$3,649,000totheirfairvalueof$2,200,000,resultinginanon-cashimpairmentchargeof$1,449,000,whichisincludedinnetincomefortheyearendedDecember31,2017.Thecategorizationoftheframeworkusedtopricetheassetsisconsideredalevel3,duetothesubjectivenatureoftheunobservableinputsusedtodeterminethefairvalue.(SeeNote2forthedisclosureofcertainkeyassumptionsusedtodeveloptheunobservableinputs.)15.QuarterlyResultsofOperations(Unaudited)March31,June30,September30,December31,20192018201920182019201820192018(Inthousands,exceptpersharedata)Netoperatingrevenue.......$27,816$28,009$32,191$32,234$31,274$31,648$31,791$32,938Stationoperatingexpenses....23,16323,39722,87923,14023,60023,42923,05023,761CorporateG&A...........2,6852,5442,7062,8482,7882,8133,2813,154Otheroperatingexpense(income),net............3(251)(2)21385852614Operatingincome..........1,9652,3196,6086,0334,8015,3215,4346,009Other(income)expenses:Interestexpense..........208219184255180243163229Interest(income).........(163)(89)(160)(188)(162)(167)(125)(187)Other(income)expense....————(11)(25)(5)2Incomebeforeincometaxes...1,9202,1896,5845,9664,7945,2705,4015,965Incometaxprovision........5506601,8501,7951,4601,5751,5601,670Netincome..............$1,370$1,529$4,734$4,171$3,334$3,695$3,841$4,295Basicearningspershare......$0.23$0.26$0.80$0.70$0.56$0.62$0.64$0.72Weightedaveragecommonshares.................5,8415,8425,8445,8345,8345,8225,8175,820Dilutedearningspershare....$0.23$0.26$0.80$0.70$0.56$0.62$0.64$0.72Weightedaveragecommonandcommonequivalentshares..5,8415,8425,8445,8345,8345,8225,8175,82078SagaCommunications,Inc.NotestoConsolidatedFinancialStatements16.LitigationTheCompanyissubjecttovariousoutstandingclaimswhichariseintheordinarycourseofbusinessandtootherlegalproceedings.ManagementanticipatesthatanypotentialliabilityoftheCompany,whichmayariseoutoforwithrespecttothesematters,willnotmateriallyaffecttheCompany’sfinancialstatements.17.SubsequentEventsOnMarch4,2020,theCompany’sBoardofDirectorsdeclaredaregularcashdividendof$0.32pershareonitsClassesAandBCommonStock.Thisdividend,totalingapproximately$1.9million,willbepaidonApril10,2020toshareholdersofrecordonMarch16,2020.79SIGNATURESPursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized,onMarch13,2020.SAGACOMMUNICATIONS,INC.By:/s/EdwardK.ChristianEdwardK.ChristianPresidentPursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowbythefollowingpersonsonbehalfoftheregistrantandinthecapacitiesindicatedonMarch13,2020.Signatures/s/EdwardK.ChristianEdwardK.ChristianPresident,ChiefExecutiveOfficerandChairmanoftheBoard/s/SamuelD.BushSamuelD.BushSeniorVicePresident,ChiefFinancialOfficerandTreasurer/s/CatherineA.BobinskiCatherineA.BobinskiSeniorVicePresident/Finance,ChiefAccountingOfficerandCorporateController/s/ClarkeR.Brown,Jr.ClarkeR.Brown,Jr.Director/s/TimothyJ.ClarkeTimothyJ.ClarkeDirector/s/RoyF.CoppedgeIIIRoyF.CoppedgeDirector/s/G.DeanPearceG.DeanPearceDirector/s/WarrenLadaWarrenLadaDirector/s/GaryG.StevensGaryG.StevensDirector80EXHIBITINDEXExhibitNo.Description3(a)(3)SecondRestatedCertificateofIncorporation,restatedasofDecember12,2003.3(b)(6)CertificateofAmendmenttotheSecondRestatedCertificateofIncorporation.3(c)(4)Bylaws,asamendedMay23,2007.4(a)(*)DescriptionoftheCompany’sSecurities10(a)(1)SummaryofExecutiveInsuredMedicalReimbursementPlan.10(b)(2)SagaCommunications,Inc.2003EmployeeStockOptionPlan.10(c)(7)ChiefExecutiveOfficerAnnualIncentivePlan.10(d)(9)SecondAmendedandRestatedSagaCommunications,Inc.2005IncentiveCompensationPlan10(e)(10)FormofStockOptionAgreementundertheSecondAmendedandRestatedSagaCommunications,Inc.2005IncentiveCompensationPlan.10(f)(10)FormofRestrictedStockOptionAgreementundertheSecondAmendedandRestatedSagaCommunications,Inc.2005IncentiveCompensationPlan.10(g)(8)EmploymentAgreementofEdwardK.ChristiandatedasofJune17,2011.10(h)(5)ChangeinControlAgreementofSamuelD.BushdatedasofDecember28,2007.10(i)(5)ChangeinControlAgreementofWarrenS.LadadatedasofDecember28,2007.10(j)(5)ChangeinControlAgreementofMarciaK.LobaitodatedasofDecember28,2007.10(k)(13)ChangeinControlAgreementofCatherineA.BobinskidatedasofDecember28,2007.10(l)(12)AmendmenttoEmploymentAgreementofEdwardK.ChristiandatedasofFebruary12,2016.10(m)(11)CreditAgreementdatedAugust18,2015enteredintobetweentheCompanyandJPMorganChaseBank,N.A.,TheHuntingtonNationalBankandCitizensBank.10(n)(14)AssetPurchaseAgreementbyandamongSagaBroadcasting,LLC,SagaQuadStatesCommunications,LLC,SagaCommunications,Inc.andEveningTelegramCompanyd/b/aMorganMurphyMedia,datedMay9,2017.10(o)(14)AssetPurchaseAgreementbyandamongApexMediaCorporation,PearceDevelopment,LLCf/k/aApexRealProperty,LLC,SagaQuadStatesCommunications,LLCandG.DeanPearce,datedMay9,2017.10(p)(15)AmendmenttotheSecondAmendmentandRestatedSagaCommunications,Inc.2005IncentiveCompensationPlanasofApril16,2018.10(q)(16)FirstAmendmenttoCreditAgreementdatedSeptember1,2017enteredintobetweentheCompanyandJPMorganChaseBank,N.A.,TheHuntingtonNationalBankandCitizensBank.10(r)(16)LetterofEmploymentforChristopherS.Forgy,SeniorVicePresident/OperationseffectiveMay28,2018.10(s)(17)SecondAmendmenttoCreditAgreementdatedJune27,2018enteredintobetweentheCompanyandJPMorganChaseBank,N.A.,TheHuntingtonNationalBankandCitizensBank.10(t)(18)ChangeinControlAgreementofChristopherForgydatedasofSeptember28,2018.10(u)(19)AmendmenttoEmploymentAgreementofEdwardK.ChristiandatedasofFebruary26,2019.81ExhibitNo.Description21(*)Subsidiaries.23(*)ConsentofUHYLLP.31.1(*)CertificationofChiefExecutiveOfficerPursuanttoRule13a-14(a)oftheSecuritiesExchangeActof1934,asAdoptedPursuanttoSection302oftheSarbanes-OxleyActof2002.31.2(*)CertificationofChiefFinancialOfficerPursuanttoRule13a-14(a)oftheSecuritiesExchangeActof1934,asAdoptedPursuanttoSection302oftheSarbanes-OxleyActof2002.32(*)CertificationofChiefExecutiveOfficerandChiefFinancialOfficerPursuantto18U.S.C.Section1350andRule13-14(b)oftheSecuritiesExchangeActof1934,asAdoptedPursuanttoSection906oftheSarbanes-OxleyActof2002.101.INS(*)XBRLInstanceDocument101.SCH(*)XBRLTaxonomyExtensionSchemaDocument101.CAL(*)XBRLTaxonomyCalculationLinkbaseDocument101.DEF(*)XBRLTaxonomyExtensionDefinitionLinkbaseDocument101.LAB(*)XBRLTaxonomyExtensionLabelLinkbaseDocument101.PRE(*)XBRLTaxonomyExtensionPresentationLinkbaseDocument(*)Filedherewith.(1)ExhibitfiledwithCompany’sForm10-KfortheyearendedDecember31,1998andincorporatedbyreferenceherein.(2)ExhibitfiledwiththeCompany’sRegistrationStatementonFrom8-A(FileNo.333-107686)filedonAugust5,2003andincorporatedbyreferenceherein.(3)ExhibitfiledwiththeCompany’sRegistrationStatementonForm8-A(FileNo.001-11588)filedonJanuary6,2004andincorporatedbyreferenceherein.(4)ExhibitfiledwiththeCompany’sForm10-KfortheyearendedDecember31,2007andincorporatedbyreferenceherein.(5)ExhibitfiledwiththeCompany’sForm8-KfiledonJanuary4,2008andincorporatedbyreferenceherein.(6)ExhibitfiledwiththeCompany’sForm8-KfiledonJanuary29,2009andincorporatedbyreferenceherein.(7)ExhibitfiledwiththeCompany’sProxyStatementforthe2010AnnualMeetingofStockholdersandincorporatedbyreferenceherein.(8)ExhibitfiledwiththeCompany’sForm10-QforthequarterendedJune30,2011andincorporatedbyreferenceherein.(9)ExhibitfiledasAppendixAtotheCompany’sConsentSolicitation(FileNo.001-11588)filedonSeptember17,2013andincorporatedbyreferenceherein.(10)ExhibitfiledwiththeCompany’sForm8-KfiledonOctober16,2013andincorporatedbyreferenceherein.(11)ExhibitfiledwiththeCompany’sForm8-KfiledonAugust18,2015andincorporatedbyreferenceherein.(12)ExhibitfiledwiththeCompany’sForm8-KfiledonFebruary17,2016andincorporatedbyreferenceherein.(13)ExhibitfiledwiththeCompany’sForm10-KfortheyearendedDecember31,2015andincorporatedbyreferenceherein.82(14)ExhibitfiledwiththeCompany’sForm8-KfiledonMay10,2017andincorporatedbyreferenceherein.(15)ExhibitfiledasAppendixAtotheCorporation’sDefinitiveProxyStatement(FileNo.001-11588)filedonApril16,2018andincorporatedbyreferenceherein.(16)ExhibitfiledwiththeCompany’sForm10-QforthequarterendedJune30,2018andincorporatedbyreferenceherein.(17)ExhibitfiledwiththeCompany’sForm8-KfiledonJune27,2018andincorporatedbyreferenceherein.(18)ExhibitfiledwiththeCompany’sForm8-KfiledonSeptember28,2018andincorporatedbyreferenceherein.(19)ExhibitfiledwiththeCompany’sForm8-KfiledonMarch1,2019andincorporatedbyreferenceherein.83[ThisPageIntentionallyLeftBlank][ThisPageIntentionallyLeftBlank][ThisPageIntentionallyLeftBlank]StockholderInformationAUDITORSTRANSFERAGENTUHYLLP,FarmingtonHills,MIComputershare,Canton,MAPUBLICATIONSTheCompany’sAnnualReportForm10-KandQuarterlyReportstoStockholdersareavailablefreeofchargetostockholders.InquiriesarewelcomebyletterortelephonetoSamuelD.Bush,SeniorVicePresident,TreasurerandCFO,attheSagaCorporateOffice.Stockholderswhosestockisheldinstreetnameareencouragedtowritetothecompanytohavetheirnamesplacedonthefinancialmailinglist,enablingthemtoreceiveannualandinterimreportswithoutdelay.YoumayfindmoreinformationaboutusatourInternetwebsitelocatedatwww.sagacommunications.com.OurAnnualreportonForm10-K,ourQuarterlyReportsonForm10-Q,ourcurrentreportsonForm8-KandanyamendmentstothosereportsareavailablefreeofchargeonourInternetwebsiteassoonasreasonablypracticableafterweelectronicallyfilesuchmaterialwith,orfurnishitto,theSEC.ANNUALMEETINGTheAnnualMeetingofStockholderswillbeheldonMonday,May11,2020at10:00amEasternDaylightTime,attheCompany’scorporateofficesat73KerchevalAvenue,GrossePointeFarms,MI.Pleasebeadvisedthat,wearemonitoringdevelopmentsregardingthecoronavirus,orCOVID-19,andpreparingintheeventanychangesforourAnnualMeetingarenecessaryorappropriate.Ifwedecidetomakeanychange,suchastothedateorlocation,ortoholdthemeetingsolelybyremotecommunication,wewillannouncethechangeinadvanceandpostdetails,includinginstructionsonhowstockholderscanparticipate,onourwebsiteatwww.sagacom.com,andfilethemwiththeSEC.Thispressreleasecontainsforward-lookingstatementsthatarebaseduponcurrentexpectationsandinvolvecertainrisksanduncertaintieswithinthemeaningoftheU.S.PrivateSecuritiesLitigationReformactof1995.Wordssuchas“believes,”“expects,”“anticipates,”“guidance”andothersimilarexpressionsareintendedtoidentifyforward-lookingstatements.KeyrisksaredescribedinthereportsSagaCommunications,Inc.periodicallyfileswiththeU.S.SecuritiesandExchangeCommission.Readersshouldnotethatthesestatementsmaybeimpactedbyseveralfactors,includingeconomicchangesintheradioandtelevisionbroadcastindustryingeneral,aswellasSaga’sactualperformance.ResultsmayvaryfromthosestatedhereinandSagaundertakesnoobligationtoupdatetheinformationcontainedherein.CORPORATEOFFICERSEdwardK.ChristianPresident,ChiefExecutiveOfficerandChairmanoftheBoardChristopherS.ForgySeniorVicePresidentofOperationsSamuelD.BushSeniorVicePresident,TreasurerandChiefFinancialOfficerMarciaK.LobaitoCorporateSecretaryCatherineA.BobinskiSeniorVicePresident–Finance,ChiefAccountingOfficerandCorporateControllerRobertG.LawrenceVicePresidentofProgrammingBOARDOFDIRECTORSEdwardK.ChristianChairmanoftheBoardGaryStevens**ManagingDirectorGaryStevens&Co.ClarkeBrown**FormerPresident–RadioDivision,Jefferson–PilotCommunicationsRoyF.CoppedgeIII*Founder&FormerManagingDirector,BVInvestmentPartnersTimothyJ.Clarke*FormerPresidentandOwner,ClarkeAdvertising&PublicRelations,Inc.G.DeanPearce*ChiefExecutiveOfficerPearceDevelopment,LLCWarrenS.LadaFormerChiefOperatingOfficerSagaCommunications,Inc.*DenotesparticipationintheAuditandFinanceCommittee**DenotesparticipationtheCompensationCommittee

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