Saga Communications
Annual Report 2021

Plain-text annual report

2021 Annual Report 2021 Annual Letter To our fellow shareholders: This is an open letter to our valued shareholders and also to those who are taking their time to read and learn more about Saga. First off, 2021 was a year that showed our recovery from 2020 and indeed demonstrated that we, as a company, were still standing. It also showed we were returning to a growth pattern. As we start off 2022 the same pattern continues. We will continue with more information and color about the company and the radio stations that make up the company. Right now, I would like to diverge and share some thoughts about why we are good, and some would say different. Let’s step into the Wayback Machine and look at the beginning of broadcast radio. It's the early 1920’s and the US radio industry was in its embryonic stage. Though stations received their “License” from the Federal Radio Commission (“FRC”), it wasn’t until 1927 that governmental structure actually occurred. In that year operational structure by the government was put in place and a credo was stated by the FRC. The FRC deemed that the airwaves were considered to be a “public utility” and every issued license was to be renewable with certain understandings. The tenets of radio were solid, short, and still in place today. The FRC (now the Federal Communications Commission) agreed not to censor radio stations but received the right to punish radio stations for offensive actions at license renewal time. The basic principles are: That licensed radio broadcasters would operate their radio stations in the “Public Interest, Convenience and Necessity” (“PICN”). We at Saga strongly believe that PICN is not only a mandate but a professional responsibility. It is, to us, as strong and true today as it was in the 1920’s….and speaking of the 1920’s let me present a few special bits of information on several of our radio stations. Our radio station WNAX serving South Dakota, Northern Nebraska, Western Iowa, and Western Minnesota, from Yankton, South Dakota was licensed in November 1922 to the Dakota Apparatus Radio Company and a few years later sold to the Gurney Seed Company. The company also had WNAX gas stations with the motto: “You will run out of gas before you run out of radio signal”. Also, in the late 20’s when radio stations had their own local musical bands, the leader of the WNAX house band was Lawrence Welk (you do have to be somewhat old to understand this). Next in the Saga line is WHCU in Ithaca, New York, “The Home of Cornell University”. This station went on the air in 1923. Also, in 1923 WTAX in Springfield, Illinois was licensed. WTAX was one of the first stations in the nation to carry live action sports. In 1925 it was KSO in Des Moines, Iowa, which later became KRNT. It was started by Berry Seed Company. Agricultural companies at that time owned quite a few radio stations. Finally in our list of 1920 stations comes KGMI in Bellingham, Washington. KGMI was originally licensed to Seattle until the owners moved it to Bellingham to provide the original radio service to the northwest corner of the state. One principle is held in common. These stations operated and committed to PICN then and they still do today. No matter what year the rest of Saga stations began their radio adventures, Public Interest, Convenience, and Necessity are the center piece of our company. It is not our secret sauce, but PICN is the bedrock of what we do. It certainly isn’t secret however that many operators treat this in lower case and small type. If you have a reputation for grasping this and holding on tight and squeezing and not letting go, our employees feel good, our listeners feel good about their particular Saga station or stations in their market, and as an aside, our shareholders are happy and feel good about their investment…and speaking about investment, here is the promised review. Net revenue for the year increased 13.1% to $108.3 million. Station operating income was $30.5 million. Free cash flow was $13.8 million for the year with net income of $11.2 million or $1.85 per fully diluted share. Our strength continues to be local direct revenue as it increased 19.8% from the full year 2020. Local direct is approximately 50% of our total net revenue for 2021. This is an increase from 46% and 47% in 2019 and 2020 respectively. Our revenue is driven by our being connected to our communities. We bring a big impact to our clients with ideas. Ideas that are turned into spec spots that address the needs of each individual client’s business. In 2021 we did over 23,000 spec spots which works out to be 16 to 17 spec spots per market per week. With ideas, spec spots and creative audio, our closing ratios exceed 35%. Our operations are very fortunate to have such quality staffers. We surround them with quality stations. What we have and what we do is a priority in our business. Rest assured that in good times and bad times we will not compromise. Unfortunately, in our industry we are seeing both reductions in operational quality and personnel reductions as a way to hold onto previous levels of operational profits. I, as well as both our corporate and local management know that since the beginning, our path provides not only quality broadcasting with forward thinking and ideas for growth, but an internal feeling of personal satisfaction and pride that was spoken first in the 1920’s. Performing great radio provides not only sunshine to our communities, but a return of smiles, laughter, and tactile attachment to each and every listener. I have, since our beginning thirty-six years ago, respected both PICN and the commitment of Saga staff to uphold wonderful values in a challenging industry. As I have said for decades, you are welcome to visit any Saga station and meet with and talk to any staff member. We don’t mind showing off. Ed Christian President/Chairman and CEO UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - K (Mark one)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2021   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from_________________________ to_______________________________ or Commission file number 1 - 11588 SAGA COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Florida (State or other jurisdiction of incorporation or organization) 73 Kercheval Avenue Grosse Pointe Farms, Michigan (Address of principal executive offices) 38 - 3042953 (I.R.S. Employer Identification No.) 48236 (Zip Code) Registrant’s telephone number, including area code: (313) 886 - 7070 Securities registered pursuant to Section 12(b) of the Act: Title of each class Class A Common Stock, $.01 par value Trading Symbol SGA Name of each exchange on which registered NASDAQ Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No  Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b - 2 of the Exchange Act. Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller Reporting Company  Emerging growth company  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b - 2 of the Act). Yes  No  Aggregate market value of the Class A Common Stock and the Class B Common Stock (assuming conversion thereof into Class A Common Stock) held by nonaffiliates of the registrant, computed on the basis of the closing price of the Class A Common Stock on June 30, 2021 on the NASDAQ: $108,082,992. The number of shares of the registrant’s Class A Common Stock, $.01 par value, and Class B Common Stock, $.01 par value, outstanding as of March 4, 2022 was 5,087,693 and 965,149, respectively. Portions of the Proxy Statement for the 2022 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company’s fiscal year) are incorporated by reference in Part III hereof. DOCUMENTS INCORPORATED BY REFERENCE Saga Communications, Inc. 2021 Form 10 - K Annual Report Table of Contents Page PART I Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1. 4 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Item 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Item 3. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Item 4. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . 32 Item 7. Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . 44 Item 9. Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 PART III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Item 12. Item 13. Item 14. Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . 46 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Item 15. Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 PART IV 2 Forward-Looking Statements Statements contained in this Form 10 - K that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “estimates,” “plans,” “expects”, “guidance,” and similar expressions are intended to identify forward-looking statements. These statements are made as of the date of this report or as otherwise indicated, based on current expectations. We undertake no obligation to update this information. A number of important factors could cause our actual results for 2022 and beyond to differ materially from those expressed in any forward-looking statements made by or on our behalf. Forward-looking statements are not guarantees of future performance as they involve a number of risks, uncertainties and assumptions that may prove to be incorrect and that may cause our actual results and experiences to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks, uncertainties and assumptions that may affect our performance, which are described in Item 1A of this report, include our financial leverage and debt service requirements, dependence on key personnel, dependence on key stations, global, U.S. and local economic conditions, our ability to successfully integrate acquired stations, regulatory requirements, new technologies, natural disasters, terrorist attacks, information technology and cybersecurity failures and data security breaches and the effects of the ongoing COVID - 19 pandemic. We cannot be sure that we will be able to anticipate or respond timely to changes in any of these factors, which could adversely affect the operating results in one or more fiscal quarters. Results of operations in any past period should not be considered, in and of itself, indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of our stock. 3 Item 1. Business PART I We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties. As of February 28, 2022, we owned seventy-nine FM, thirty-four AM radio stations and seventy-nine metro signals serving twenty-seven markets. Strategy Our strategy is to operate top billing radio stations in mid-sized markets, which we define as markets ranked from 20 to 200 out of the markets summarized by Investing in Radio Market Report. Programming and marketing are key components in our strategy to achieve top ratings in our radio operations. In many of our markets, the three or four most highly rated radio stations receive a disproportionately high share of the market’s advertising revenues. As a result, a station’s revenue is dependent upon its ability to maximize its number of listeners/viewers within an advertiser’s given demographic parameters. In certain cases we use attributes other than specific market listener data for sales activities. In those markets where sufficient alternative data is available, we do not subscribe to an independent listener rating service. The radio stations that we own and/or operate employ a variety of programming formats, including Classic Hits, Adult Hits, Top 40, Country, Country Legends, Mainstream/Hot/Soft Adult Contemporary, Pure Oldies, Classic Rock, and News/Talk. We regularly perform extensive market research, including music evaluations, focus groups and strategic vulnerability studies. Our stations also employ audience promotions to further develop and secure a loyal following. We concentrate on the development of strong decentralized local management, which is responsible for the day-to- day operations of the stations we own and/or operate. We compensate local management based on the station’s financial performance, as well as other performance factors that are deemed to affect the long-term ability of the stations to achieve financial performance objectives. Corporate management is responsible for long-range planning, establishing policies and procedures, resource allocation and monitoring the activities of the stations. Under the Telecommunications Act of 1996 (the “Telecommunications Act”), we are permitted to own up to eight radio stations in a single market. See “Federal Regulation of Radio Broadcasting”. We seek to acquire reasonably priced broadcast properties with significant growth potential that are located in markets with well-established and relatively stable economies. We often focus on local economies supported by a strong presence of state or federal government or one or more major universities. Future acquisitions will be subject to the availability of financing, the terms of our credit facility, and compliance with the Communications Act of 1934 (the “Communications Act”) and Federal Communications Commission (“FCC”) rules. Advertising Sales Our primary source of revenue is from the sale of advertising for broadcast on our stations. Depending on the format of a particular radio station, there are a predetermined number of advertisements broadcast each hour. We determine the number of advertisements broadcast hourly that can maximize a station’s available revenue dollars without jeopardizing listening/viewing levels. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory. 4 Advertising rates charged by radio stations are based primarily on a station’s ability to attract audiences in the demographic groups targeted by advertisers, the number of stations in the market competing for the same demographic group, the supply of and demand for radio advertising time, and other qualitative factors including rates charged by competing radio stations within a given market. Radio rates are generally highest during morning and afternoon drive- time hours. Most advertising contracts are short-term, generally running for only a few weeks. This allows broadcasters the ability to modify advertising rates as dictated by changes in station ownership within a market, changes in listener/viewer ratings and changes in the business climate within a particular market. Approximately $102,367,000 or 89% of our gross revenue for the year ended December 31, 2021 (approximately $86,562,000 or 84% in fiscal 2020 and approximately $116,474,000 or 88% in fiscal 2019) was generated from the sale of local advertising. Additional revenue is generated from the sale of national advertising, network compensation payments, barter and other miscellaneous transactions. In all of our markets, we attempt to maintain a local sales force that is generally larger than our competitors. The principal goal in our sales efforts is to develop long-standing customer relationships through frequent direct contacts, which we believe represents a competitive advantage. We also typically provide incentives to our sales staff to seek out new opportunities resulting in the establishment of new client relationships, as well as new sources of revenue, not directly associated with the sale of broadcast time. Each of our stations also engages independent national sales representatives to assist us in obtaining national advertising revenues. These representatives obtain advertising through national advertising agencies and receive a commission from us based on our net revenue from the advertising obtained. Total gross revenue resulting from national advertising in fiscal 2021 was approximately $13,138,000 or 11% of our gross revenue (approximately $16,361,000 or 16% in fiscal 2020 and approximately $15,914,000 or 12% in fiscal 2019). Gross national political revenue is included in these numbers. Competition Radio broadcasting is a highly competitive business. Our stations compete for listeners and advertising revenues directly with other radio stations, as well as other media, within their markets. Our radio stations compete for listeners primarily on the basis of program content and by employing on-air talent which appeals to a particular demographic group. By building a strong listener base comprised of a specific demographic group in each of our markets, we are able to attract advertisers seeking to reach these listeners. Other media, including broadcast television and/or radio (as applicable), cable television, newspapers, magazines, direct mail, the Internet, coupons and billboard advertising, also compete with us for advertising revenues. The radio broadcasting industry is also subject to competition from new media technologies, such as the delivery of audio programming by cable and satellite television systems, satellite radio systems, direct reception from satellites, and streaming of audio on the Internet. Seasonality Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, is generally lowest in the first quarter. Additionally, given the disruptions in economic activity caused by the COVID - 19 pandemic, our quarterly results in 2021 are not necessarily indicative of results that may be achieved in the future. 5 Environmental Compliance As the owner, lessee or operator of various real properties and facilities, we are subject to various federal, state and local environmental laws and regulations. Historically, compliance with these laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, that compliance with existing or new environmental laws and regulations will not require us to make significant expenditures of funds. Human Capital Resources Our key human capital management objectives are to attract, develop and retain top industry talent that reflects the diversity of the communities in which we broadcast. To support this goal, our human resources programs are designed to develop talent to prepare for key roles and leadership positions for the future; reward employees through competitive industry pay, benefits and other programs, instill our culture with a focus on ethical behavior and enhance our employees’ performance through investment in current technology, tools and training to enable our employees to operate at a high level. As of December 31, 2021, we had approximately 570 full-time employees and 227 part-time employees, none of whom are represented by unions. We believe that our relations with our employees are good. We employ several high-profile personalities with large loyal audiences in their respective markets. We have entered into employment and non-competition agreements with our President and with most of our on-air personalities, as well as non-competition agreements with our commissioned sales representatives. We are committed to hiring, developing and supporting a diverse and inclusive workplace. Our management teams are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our employees must adhere to a code of conduct that sets standards for appropriate ethical behavior. Available Information You can find more information about us at our Internet website www.sagacom.com. Our Annual Report on Form 10 - K, our Quarterly Reports on Form 10 - Q, our Current Reports on Form 8 - K and any amendments to those reports are available free of charge on our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). Federal Regulation of Radio Broadcasting Introduction. The ownership, operation and sale of radio stations, including those licensed to us, are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. Among other things, the FCC assigns frequency bands for broadcasting; determines the particular frequencies, locations and operating power of stations; issues, renews, revokes and modifies station licenses; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; and has the power to impose penalties for violations of its rules or the Communications Act. For additional information on the impact of FCC regulations and the introduction of new technologies on our operations, see “Forward Looking Statements” and “Risk Factors” contained elsewhere in this report. 6 The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Reference should be made to the Communications Act, FCC rules (Title 47 Code of Federal Regulation, Chapter I, Subchapters A and C) and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. License Renewal. Radio broadcasting licenses are granted for maximum terms of eight years, and are subject to renewal upon application to the FCC. Under its “two-step” renewal process, the FCC must grant a renewal application if it finds that during the preceding term the licensee has served the public interest, convenience and necessity, and there have been no serious violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. If a renewal applicant fails to meet these standards, the FCC may either deny its application or grant the application on such terms and conditions as are appropriate, including renewal for less than the full 8 - year term. In making the determination of whether to renew the license, the FCC may not consider whether the public interest would be served by the grant of a license to a person other than the renewal applicant. If the FCC, after notice and opportunity for a hearing, finds that the licensee has failed to meet the requirements for renewal and no mitigating factors justify the imposition of lesser sanctions, the FCC may issue an order denying the renewal application, and only thereafter may the FCC accept applications for a construction permit specifying the broadcasting facilities of the former licensee. Petitions may be filed to deny the renewal applications of our stations, but any such petitions must raise issues that would cause the FCC to deny a renewal application under the standards adopted in the “two-step” renewal process. Failure to renew a license could have a material adverse effect on the Company’s business. Radio station licenses generally expire along with the licenses of all other radio stations in a given state. The FCC accepts renewal applications for various groups of radio stations every two months, the current cycle having begun in June 2019 and will conclude for the Company’s stations in June 2022 (when New York station licenses expire). During the cycle, we have timely filed renewal applications, as required for the Company’s stations in Virginia, North Carolina, South Carolina, Florida, Tennessee, Kentucky, Arkansas, Ohio, Illinois, Wisconsin, Iowa and South Dakota, which applications have been granted. Applications for renewal of license of our radio stations in Maine, Massachusetts, New Hampshire, Vermont and New York are pending. In January 2018 and again in February 2022, the FCC designated the renewal applications of radio stations (not the Company’s) for hearing based on the stations’ records of extended periods of silence during and following their respective license renewal terms. Under the Communications Act, if a broadcast station fails to transmit signals for any consecutive 12 - month period, the FCC license expires at the end of that period, unless the FCC exercises its discretion to extend or reinstate the license “to promote equity and fairness.” The FCC, to date, has rarely exercised such discretion. Further, the FCC has revoked the licenses of broadcast stations that failed to pay regulatory fees. The Company is current in the payment of regulatory fees to the FCC. 7 The following table sets forth information about our radio stations, including the markets they serve, their format, and the FCC class of each of the broadcast stations that we own or operate with an attributable interest and the date on which each such station’s FCC license expires: Station FM: WOXL WTMT KISM KAFE WRSY WKVT WQEL WLRW WIXY WREE WYXY WAVF WCKN WMXZ WXST WWWV WQMZ WCNR WCVL WCVQ WZZP WVVR WRND WSNY WNNP WNND WVMX WLVQ KSTZ KIOA KAZR KOEZ WHAI WPVQ WMQR WQPO WSIG WWRE WOEZ WLHH WVSC WYXL WQNY WIII WFIZ Market (1) Station Format FCC Station Expiration Date of Class (2) FCC Authorization Hot Adult Contemporary Classic Rock Classic Rock Adult Contemporary Adult Album Alternative Classic Hits Classic Hits Hot Adult Contemporary Country Classic Hits Classic Country Adult Variety Hits Contemporary Country Hot Adult Contemporary Urban Adult Contemporary Classic Rock Adult Contemporary Adult Album Alternative Contemporary Country Asheville, NC Asheville, NC Bellingham, WA Bellingham, WA Brattleboro, VT Brattleboro, VT Bucyrus, OH Champaign, IL Champaign, IL Champaign, IL Champaign, IL Charleston, SC Charleston, SC Charleston, SC Charleston, SC Charlottesville, VA Charlottesville, VA Charlottesville, VA Charlottesville, VA Clarksville, TN/Hopkinsville, KY Hot Adult Contemporary Clarksville, TN/Hopkinsville, KY Rock Clarksville, TN/Hopkinsville, KY Contemporary Country Clarksville, TN/Hopkinsville, KY Classic Hits Columbus, OH Columbus, OH Columbus, OH Columbus, OH Columbus, OH Des Moines, IA Des Moines, IA Des Moines, IA Des Moines, IA Greenfield, MA Greenfield, MA Harrisonburg, VA Harrisonburg, VA Harrisonburg, VA Harrisonburg, VA Hilton Head Island, SC Hilton Head Island, SC Hilton Head Island, SC Ithaca, NY Ithaca, NY Ithaca, NY Ithaca, NY Adult Contemporary Classic Hits Classic Hits Hot Adult Contemporary Classic Rock Hot Adult Contemporary Classic Hits Rock Soft Adult Contemporary Adult Contemporary Contemporary Country Adult Contemporary Contemporary Hits Classic Country Classic Hits Classic Hits Soft Adult Contemporary Adult Contemporary Adult Contemporary Contemporary Country Classic Rock Contemporary Hits 8 April 1, 2022 (3) April 1, 2022 (3) C2 December 1, 2027 C2 December 1, 2027 February 1, 2030 C C February 1, 2030 A A A October 1, 2028 B December 1, 2028 B1 December 1, 2028 B1 December 1, 2028 B December 1, 2028 C December 1, 2027 C1 December 1, 2027 C2 December 1, 2027 C1 December 1, 2027 October 1, 2027 B October 1, 2027 A October 1, 2027 A October 1, 2027 A August 1, 2028 C1 August 1, 2028 A August 1, 2028 C0 August 1, 2028 A October 1, 2028 B October 1, 2028 A October 1, 2028 A October 1, 2028 A October 1, 2028 B February 1, 2029 C February 1, 2029 C1 February 1, 2029 C1 February 1, 2029 C1 A A October 1, 2027 B1 October 1, 2027 B October 1, 2027 B1 A October 1, 2027 C3 December 1, 2027 C3 December 1, 2027 C3 December 1, 2027 B B B A June 1, 2022 (3) June 1, 2022 (3) June 1, 2022 (3) June 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) Station KEGI KDXY KJBX WKNE WSNI WINQ WZID WMLL WKLH WHQG WRXS WJMR KMIT KUQL WNOR WAFX WOGK WYND WNDD WNDN WRSI WPOR WCLZ WMGX WYNZ KICD KMRR WLZX WAQY WYMG WLFZ WDBR WTAX WNAX AM: WISE WYSE KGMI KPUG KBAI WINQ WBCO WSPO WINA WVAX WQEZ WKFN WNZE KRNT KPSZ Market (1) Station Format Jonesboro, AR Jonesboro, AR Jonesboro, AR Keene, NH Keene, NH Keene, NH Manchester, NH Manchester, NH Milwaukee, WI Milwaukee, WI Milwaukee, WI Milwaukee, WI Mitchell, SD Mitchell, SD Norfolk, VA Norfolk, VA Ocala, FL Ocala, FL Ocala, FL Ocala, FL Northampton, MA Portland, ME Portland, ME Portland, ME Portland, ME Spencer, IA Spencer, IA Springfield, MA Springfield, MA Springfield, IL Springfield, IL Springfield, IL Springfield, IL Yankton, SD Classic Rock Contemporary Country Adult Contemporary Hot Adult Contemporary Adult Contemporary Contemporary Country Adult Contemporary Classic Rock Classic Rock Rock Pure Oldies Urban Adult Contemporary Contemporary Country Classic Hits Rock Classic Rock Contemporary Country Classic Rock Classic Rock Classic Rock Adult Album Alternative Contemporary Country Adult Album Alternative Hot Adult Contemporary Classic Hits Contemporary Country Adult Contemporary Classic Rock Alternative Rock Classic Rock Contemporary Country Contemporary Hits News/Talk Contemporary Country FCC Station Expiration Date of FCC Authorization Class (2) June 1, 2028 June 1, 2028 June 1, 2028 April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) C2 C3 C3 B A A B A B December 1, 2028 B December 1, 2028 A December 1, 2028 A December 1, 2028 April 1, 2029 C1 April 1, 2029 C1 October 1, 2027 B October 1, 2027 C February 1, 2028 C0 February 1, 2028 A February 1, 2028 A A February 1, 2028 A B B B B1 C1 C3 A B B December 1, 2028 B December 1, 2028 B December 1, 2028 B1 December 1, 2028 April 1, 2029 C1 February 1, 2029 February 1, 2029 April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) Sports/Talk Sports/Talk News/Talk Sports/Talk Classic Hits News/Talk Classic Country Gospel News/Talk Sports/Talk Asheville, NC Asheville, NC Bellingham, WA Bellingham, WA Bellingham, WA Brattleboro, VT Bucyrus, OH Charleston, SC Charlottesville, VA Charlottesville, VA Clarksville, TN/Hopkinsville, KY Soft Adult Contemporary Clarksville, TN/Hopkinsville, KY Sports/Talk ESPN Clarksville, TN/Hopkinsville, KY News/Talk Des Moines, IA Des Moines, IA Sports Christian April 1, 2022 (3) B December 1, 2027 D December 1, 2027 February 1, 2030 B February 1, 2030 B B February 1, 2030 C D October 1, 2028 B December 1, 2027 October 1, 2027 B October 1, 2027 C August 1, 2028 D August 1, 2028 D August 1, 2028 C February 1, 2029 B February 1, 2029 B 9 Station WHMQ WPVQ WSVA WHBG WHCU WNYY WKBK WZBK WFEA WJOI WHMP WGAN WZAN WBAE WVAE KICD WLZX WTAX WNAX Market (1) Station Format FCC Station Expiration Date of FCC Authorization Class (2) Greenfield, MA Greenfield, MA Harrisonburg, VA Harrisonburg, VA Ithaca, NY Ithaca, NY Keene, NH Keene, NH Manchester, NH Milwaukee, WI Northampton, MA Portland, ME Portland, ME Portland, ME Portland, ME Spencer, IA Springfield, MA Springfield, IL Yankton, SD News/Talk Country Legends News/Talk Sports ESPN News/Talk Oldies News/Talk Classic Hits News/Talk Christian News/Talk News/Talk Country Legends Soft Adult Contemporary Soft Adult Contemporary News/Talk Alternative Rock News/Talk News/Talk C D B D B B B D B C C B B C C C D C B April 1, 2022 (3) April 1, 2022 (3) October 1, 2027 October 1, 2027 June 1, 2022 (3) June 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) December 1, 2028 April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) April 1, 2022 (3) February 1, 2029 April 1, 2022 (3) December 1, 2028 April 1, 2029 (1) Some stations are licensed to a different community located within the market that they serve. (2) In order of increasing power, AM stations are classified as: Class D, C, B or A. (See Title 47 C.F.R. §73.21 for a definition of AM station class information, including operating power.) In order of increasing power and antenna height, FM stations are classified as: Class A, B1, C3, B, C2, C1, C0 or C. (See Title 47 C.F.R. §73.210 for a definition of FM station class information, including effective radiated power [“ERP”] and antenna height.) WISE, KPSZ, KPUG, KGMI, KBAI, WNYY, WHCU, WINQ(AM) and WSVA operate with lower power at night than during daytime. WYSE, WBCO, WQEZ, WKFN, WPVQ, WHBG, WZBK and WLZX(AM) are “Class D” stations that operate daytime only or with greatly reduced power at night. (3) An application for renewal of license was timely filed and is pending. Ownership Matters. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant or renew a broadcast license, the FCC considers a number of factors pertaining to the licensee, including compliance with the Communications Act’s limitations on alien ownership; compliance with various rules limiting common ownership of broadcast, cable and newspaper properties; and the “character” and other qualifications of the licensee and those persons holding “attributable or cognizable” interests therein. Under the Communications Act (Section 310(b)), broadcast licenses may not be granted to any corporation having more than one-fifth of its issued and outstanding capital stock owned or voted by aliens (including non-U.S. corporations), foreign governments or their representatives (collectively, “Aliens”). The Communications Act also prohibits a corporation, without FCC waiver, from holding a broadcast license if that corporation is controlled, directly or indirectly, by another corporation in which more than 25% of the issued and outstanding capital stock is owned or voted by Aliens. The FCC has issued interpretations of existing law under which these restrictions in modified form apply to other forms of business organizations, including partnerships. We serve as a holding company for our various radio station subsidiaries (and as such we cannot have more than 25% of our stock owned or voted by Aliens). 10 The FCC has adopted rules to extend to broadcast licensees the same rules and procedures that common carrier wireless licensees use to seek approval for foreign ownership, with broadcast-specific modifications. The rules and procedures allow a broadcast licensee to request in a petition for declaratory ruling under Title 47 U.S.C. Section 310(b)(4): (1) approval of up to and including 100 percent aggregate foreign ownership of its controlling U.S. parent; (2) approval for a proposed, controlling foreign investor to increase its equity and/or voting interests in the U.S. parent up to and including 100 percent at some future time without filing a new petition—this applies where the foreign investor would acquire an initial controlling interest of less than 100 percent; and (3) approval for a non-controlling foreign investor named in the petition to increase its equity and/or voting interests in the U.S. parent at some future time, up to and including a non-controlling 49.99 percent equity and/or voting interest. The rules require the Company to seek specific approval only of foreign individuals or entities with a greater than 5 percent ownership interest (or, in certain situations, an interest greater than 10 percent). The rules allow broadcast licensees that have foreign ownership rulings to apply those rulings to all radio and television broadcast licenses then held or subsequently proposed to be acquired by the same licensee and its covered subsidiaries and affiliates, regardless of the broadcast service (e.g., AM, FM, or TV) or the geographic area in which the stations are located. The methodology provides a framework for a publicly traded licensee or controlling U.S. parent to ascertain its foreign ownership using information that is “known or reasonably should be known” to the company in the ordinary course of business. For publicly traded licensees and U.S. parent companies (like the Company), the rules formalize the current equitable practice of recognizing a licensee’s good faith efforts to comply with Section 310(b) where the non- compliance was due solely to circumstances beyond the licensee’s control that were not known or reasonably foreseeable to the licensee. We are permitted to own an unlimited number of radio stations on a nationwide basis (subject to the local ownership restrictions described below). Under the rules, the number of radio stations one party may own in a local Nielsen Audio-rated radio market is determined by the number of full-power commercial and noncommercial radio stations in the market as determined by Nielsen Audio and BIA Advisory Services, LLC d/b/a BIA/Kelsey. Radio markets that are not Nielsen Audio rated are determined by analysis of the broadcast coverage contours of the radio stations involved. 11 Under the Communications Act, and the FCC’s “Local Ownership Rule,” we are permitted to own radio stations (without regard to the audience shares of the stations) based upon the number of full-power commercial and noncommercial radio stations in the relevant radio market as follows: Number of Stations In Radio Market 14 or Fewer . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of Stations We Can Own Total of 5 stations, not more than 3 in the same service (AM or FM), except the Company cannot own more than 50% of the stations in the market. 15 - 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total of 6 stations, not more than 4 in the same service (AM or FM). 30 - 44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total of 7 stations, not more than 4 in the same service (AM or FM). 45 or More . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total of 8 stations, not more than 5 in the same service (AM or FM). The Commission’s 2010/2014 Quadrennial Review Order on Reconsideration, 32 FCC Rcd 9802 (2017), modified the Commission’s media ownership rules by: (1) eliminating the newspaper/broadcast cross-ownership and radio/television cross-ownership rules; (2) revising the local television ownership rule by eliminating the “eight voices” test and permitting applicants to seek the combination of two top-four ranked stations in a given market on a case-by- case basis; and (3) deeming joint sales agreements between television stations to be non-attributable. (In FCC v. Prometheus Radio Project, 141 S. Ct. 1150 (2021), the U. S. Supreme Court reversed a decision of the Court of Appeals for the Third Circuit which had vacated the Commission’s 2017 order.) New rules that could be promulgated under the Communications Act may permit us to own, operate, control or have a cognizable interest in additional radio broadcast stations if the FCC determines that such ownership, operation, control or cognizable interest will result in an increase in the number of radio stations in operation. No firm date has been established for initiation of this rule-making proceeding. New rules could restrict the Company’s ability to acquire additional radio and television stations in some markets. The Court and FCC proceedings are ongoing and we cannot predict what action, if any, the Court or the FCC may take to further modify its rules. Due to changes in local radio markets, the ownership of some of our radio stations, in the future, could exceed the current ownership limits imposed by the Local Ownership Rule. Their current ownership structure is “grandfathered” by the FCC. Absent a waiver, it might not be possible to sell all of them as currently configured in “clusters” to a single purchaser. The statements herein are based solely on the FCC’s multiple ownership rules in effect as of the date hereof and do not include any forward- looking statements concerning compliance with any future multiple ownership rules. 12 All commercial broadcasters were required to file a “biennial” ownership report by December 1, 2021, describing the ownership of their stations as of October 1, 2021. The FCC eliminated the prior requirement to file with the FCC paper copies of certain agreements, corporate organization documents, and the like. Instead, a broadcaster is required to upload copies of these documents to the station’s online public inspection file, or provide a list of such documents and make them available to a requesting party. The FCC generally applies its ownership limits to “attributable” interests held by an individual, corporation, partnership or other association. In the case of corporations holding broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation’s stock (or 20% or more of such stock in the case of certain passive investors that are holding stock for investment purposes only) are generally attributable, as are positions of an officer or director of a corporate parent of a broadcast licensee. Currently, none of our directors has an attributable interest or interests in companies applying for or licensed to operate broadcast stations other than us. The FCC’s ownership attribution rules (a) apply to limited liability companies and registered limited liability partnerships the same attribution rules that the FCC applies to limited partnerships; and (b) include an equity/debt plus (“EDP”) rule that attributes the other media interests of an otherwise passive investor if the investor is (1) a “major- market program supplier” that supplies over 15% of a station’s total weekly broadcast programming hours, or (2) a same-market media entity subject to the FCC’s multiple ownership rules (including broadcasters, cable operators and newspapers) so that its interest in a licensee or other media entity in that market will be attributed if that interest, aggregating both debt and equity holdings, exceeds 33% of the total asset value (equity plus debt) of the licensee or media entity. We could be prohibited from acquiring a financial interest in stations in markets where application of the EDP rule would result in us having an attributable interest in the stations. In reconsidering its rules, the FCC also eliminated the “single majority shareholder exemption” which provides that minority voting shares in a corporation where one shareholder controls a majority of the voting stock are not attributable; however, the FCC “suspended” the elimination of this exemption until the FCC resolved issues concerning cable television ownership. The FCC announced in 2016 that it would address this issue, among others, in a subsequent decision, but the FCC has so far taken no action on the matters. In addition to the FCC’s multiple ownership rules, the Antitrust Division of the United States Department of Justice and the Federal Trade Commission and some state governments have the authority to examine proposed transactions for compliance with antitrust statutes and guidelines. The Antitrust Division has issued “civil investigative demands” and obtained consent decrees requiring the divestiture of stations in a particular market based on antitrust concerns. 13 Programming and Operation. The Communications Act requires broadcasters to serve the “public interest.” Licensees are required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station’s programming often will be considered by the FCC when it evaluates renewal applications of a licensee, although such complaints may be filed at any time and generally may be considered by the FCC at any time. Stations also must follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identification, the advertisement of contests and lotteries, obscene and indecent broadcasts, and technical operations, including limits on radio frequency radiation. In 2020, the FCC entered into a Consent Decree with Sinclair Broadcast Group, which agreed to pay a $48 million dollar fine to settle issues related to sponsorship identification violations, among other matters. The FCC also entered into a Consent Decree with Cumulus Radio to settle violations of the sponsorship identification requirements in connection with the broadcast of issue ads promoting a construction project in New Hampshire. There are other examples of FCC enforcement action for violation of the sponsorship identification requirements. A licensee that broadcasts or advertises information about a contest it conducts must fully and accurately disclose the material terms of the contest, and conduct the contest substantially as announced or advertised over the air or on the Internet. The disclosure of material terms must be made by either periodic disclosures broadcast on the station or written disclosures on the station’s Internet web site. Violation of the rule can result in significant fines. In 2020, the FCC fined a broadcaster $5,200 for failing to conduct its contests as advertised by failing to award prizes in a timely manner. Another licensee entered into a Consent Decree with the FCC, paying a fine of $125,000 for, among other things, predetermining the outcome of a contest. The FCC requires the owners of antenna supporting structures (towers) to register them with the FCC. As an owner of such towers, our subsidiaries are subject to the registration requirements. On January 13, 2020, the FCC released an Order confirming a Consent Decree whereby the owner of several antenna structures agreed to pay the government a civil penalty of $1,130,000 and develop a Compliance Plan requiring reports for two years as a result of (1) failing to conduct required daily inspections of the lighting systems at 10 towers, (2) failing to completely log lighting failures at 7 towers, and (3) failing to timely notify the FCC of its acquisition of 2 towers. In 2017, the FCC eliminated the broadcast main studio rule. The FCC retained the requirement that stations maintain a local or toll-free telephone number to ensure consumers have ready access to their local stations. The FCC’s rules require cable operators, direct satellite TV providers, broadcast radio licensees, and satellite radio licensees to post public inspection files to the FCC’s online database (the “online public inspection file” or “OPIF”) rather than maintaining them in a local public inspection file. The FCC believes posting these files to the OPIF renders the materials more widely accessible to the public. The Company’s radio stations post their public inspection files to the FCC’s website. The FCC has warned licensees of possible enforcement action if these files are found not to be in compliance at the time of license renewal. Because of inadvertent untimely posting of certain political records at stations owned by one of the Company’s subsidiaries, that subsidiary was obliged to enter into a Consent Decree with the FCC (FCC Order, DA 201263, released October 26, 2020). The Consent Decree required Company employees responsible for performing, supervising, overseeing, or managing activities related to the maintenance of online political files to thoroughly understand the Company’s obligation to comply with laws regulating political broadcasting and to promptly report to the FCC any noncompliance with those laws. The affected subsidiary filed a report with the FCC on December 8, 2021, regarding its record of compliance with the political laws and the Company’s obligations under the Consent Decree terminated as of February 7, 2022. The FCC in 2020 revised its rules governing the publication of local notice of the filing of certain broadcast applications. FCC licensees, like the Company, must maintain a tab on their station websites where the public can view the OPIF and a tab where notices describing pending applications must be posted, rather than printing such notices in local newspapers. The Company is required to pay (1) FCC filing fees in connection with its applications and (2) annual regulatory fees determined by the number and character of the radio stations the Company owns as of October 1 of each prior year. 14 Equal Employment Opportunity Rules. Equal employment opportunity (EEO) rules and policies for broadcasters prohibit discrimination by broadcasters and multichannel video programming distributors. They also require broadcasters to provide notice of job vacancies and to undertake additional outreach measures, such as job fairs and scholarship programs. The rules mandate a “three prong” outreach program; i.e., Prong 1: widely disseminate information concerning each full-time (30 hours or more) job vacancy, except for vacancies filled in exigent circumstances; Prong 2: provide notice of each full-time job vacancy to recruitment organizations that have requested such notice; and Prong 3: complete two (for broadcast employment units with five to ten full-time employees or that are located in smaller markets) or four (for employment units with more than ten full-time employees located in larger markets) longer-term recruitment initiatives within a two-year period. These include, for example, job fairs, scholarship and internship programs, and other community events designed to inform the public as to employment opportunities in broadcasting. The rules mandate extensive record keeping and reporting requirements. In 2017, the FCC issued a Declaratory Ruling permitting broadcast stations to use the internet for job postings as their sole means of recruiting employees (so long as the postings reach all segments of the station’s community. The EEO rules are enforced through review at renewal time, and through random audits and targeted investigations resulting from information received as to possible violations. The FCC has not yet decided on whether and how to apply the EEO rule to part-time positions. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of “short” (less than the full eight-year) renewal terms or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. As announced in an Notice of Proposed Ruemaking (“NPRM”) released June 21, 2019 (MB Docket No. 19 - 177), the FCC is reviewing the EEO rules. In the NPRM, the FCC seeks comment on its track record on EEO enforcement, whether the agency should make improvements to EEO compliance and enforcement, and invites comment on its audit program. In a Further NPRM (MB Docket No. 98 - 204), released July 23, 2021, the Commission sought to refresh the existing record regarding the statutorily mandated collection of data on the FCC Form 395 - B, as contemplated by the Act. This employment report form is intended to gather workforce composition data from broadcasters on an annual basis but the form and data have not been collected for many years. The filing of the form was suspended in 2001 in the wake of a decision by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) vacating certain aspects of the Commission’s Equal Employment Opportunity (EEO) requirements. While the Commission in 2004 adopted revised regulations regarding the filing of Form 395 - B and updated the form, the requirement that broadcasters once again submit the form to the Commission was suspended until issues were resolved regarding confidentiality of the employment data. To date, those issues remain unresolved, and the filing of Form 395 - B remains suspended. The Commission is seeking “to refresh the record” regarding the collection of broadcaster workforce composition data and obtain further input on the legal, logistical, and technical issues surrounding FCC Form 395 - B. The Company cannot predict whether, or if changes may be made as a result of these NPRMs. Time Brokerage Agreements. As is common in the industry, we have previously entered into what have commonly been referred to as Time Brokerage Agreements (“TBAs”) which are sometimes termed “Local Marketing Agreements.” Such arrangements are an extension of the concept of agreements under which a licensee of a station sells blocks of time on its station to an entity or entities which purchase the blocks of time and which sell their own commercial advertising announcements during the time periods in question. While these agreements may take varying forms, under a typical TBA, separately owned and licensed radio or television stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with the FCC’s rules and policies. Under these types of arrangements, separately-owned stations agree to function cooperatively in terms of programming, advertising sales, and other matters, subject to the licensee of each station maintaining independent control over the financing, programming and station operations of its own station. One typical type of TBA is a programming agreement between two separately-owned radio or television stations serving a common service area, whereby the licensee of one station purchases substantial portions of the broadcast day on the other licensee’s station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during such program segments. 15 The FCC’s rules provide that a station purchasing (brokering) time on another station serving the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC’s multiple ownership rules. As a result, under the rules, a broadcast station will not be permitted to enter into a time brokerage agreement giving it the right to purchase more than 15% of the broadcast time, on a weekly basis, of another local station that it could not own under the local ownership rules of the FCC’s multiple ownership rules. Effective October 22, 2020, the FCC eliminated Title 47 C.F.R. § 73.3556, a rule that prohibited the duplication of programming on co-owned radio stations in the same market. A petition for reconsideration of that action as to FM duplication is pending. The Company cannot predict how the FCC may act on that petition. Other FCC Requirements. Low Power FM Radio. There exists a “low power radio service” on the FM band (“LPFM”) in which the FCC authorizes the construction and operation of noncommercial educational FM stations with up to 100 watts ERP with antenna height above average terrain (“HAAT”) at up to 30 meters (100 feet). This combination is calculated to produce a service area radius of approximately 3.5 miles. The FCC’s rules will not permit any broadcaster or other media entity subject to the FCC’s ownership rules to control or hold an attributable interest in an LPFM station or enter into related operating agreements with an LPFM licensee. Thus, absent a waiver, we could not own or program an LPFM station. LPFM stations are allocated throughout the FM broadcast band, (i.e., 88.1 to 107.9 MHz), although they must operate with a noncommercial format. The FCC has established allocation rules that require FM stations to be separated by specified distances to other stations on the same frequency, and stations on frequencies on the first, second and third channels adjacent to the center frequency. The FCC has granted construction permits and licenses for LPFM stations. As required by the Local Community Radio Act of 2010, the FCC in 2012 modified its rules to maintain its existing minimum distance separation requirements for full-service FM stations, FM translator stations, and FM booster stations that broadcast radio reading services via an analog subcarrier frequency to avoid potential interference by LPFM stations; and when licensing new FM translator stations, FM booster stations, and LPFM stations, to ensure that: (i) licenses are available to FM translator stations, FM booster stations, and LPFM stations; (ii) such decisions are made based on the needs of the local community; and (iii) FM translator stations, FM booster stations, and LPFM stations remain equal in status and secondary to existing and modified full-service FM stations. By Report and Order, released April 23, 2020, the FCC modified the LPFM technical rules in four main ways: (1) expanding the permissible use of directional antennas; (2) expanding the definition of minor change applications for LPFM stations; (3) allowing LPFM stations to own FM boosters; and (4) permitting LPFM and Class D FM stations operating on the FM reserved band (channels 201 to 220) reserved band (channels 201 to 220) to propose facilities short-spaced to television stations operating on channel 6 (TV6) with the consent of the potentially affected stations. The FCC also took other less significant actions affecting the LPFM service. On January 5, 2012, the FCC released a Report to Congress on the impact that LPFM stations would have on full- service commercial FM stations. The FCC “found no statistically reliable evidence that low-power FM stations have a substantial or consistent economic impact on full-service commercial FM stations,” and that “low-power FM stations generally do not have, and in the future are unlikely to have, a demonstrable economic impact on full-service commercial FM radio stations.” Some LPFM stations that broadcast commercial announcements in violation of the law could have a negative economic impact on the Company’s stations. Although rule-compliant LPFM stations compete for audience with the Company’s full-power and FM translator stations, the Company cannot predict whether there will be future negative economic impact on its stations. 16 As part of the transition from analog to digital operations, the FCC sought comment in a 2014 NPRM on whether to allow LPTV stations (so-called “Franken FM” radio stations) on digital television channel 6 to continue to operate these analog FM radio-type services on an ancillary or supplementary basis. In June 2021, by Public Notice, the FCC reminded LPTV and TV translator stations that, by July 13, 2021, all LPTV stations must terminate all analog television operations. This could result in eliminating Franken FM stations. The owner of several channel 6 Franken FM stations in major markets, has proposed a system that allows an analog subcarrier to be used on the main digital channel. The FCC’s Video Division has granted special temporary authority to the owner of one of the Franken FM stations permitting the station to broadcast a Channel 6 analog signal until July 25, 2022. The Company cannot predict whether Franken FM stations will become licensed radio services. As a broadcaster, the Company is required to comply with the FCC rules implementing the Emergency Alert System (“EAS”). The Company’s stations must transmit Presidential messages during national emergencies and may transmit local messages, such as severe weather alerts and AMBER (America’s Missing: Broadcast Emergency Response) alerts. On January 7, 2021, the FCC’s Enforcement Bureau issued an “Enforcement Advisory” which highlighted EAS participants’ obligations, identified measures to improve the EAS, and warned that failure to comply with the EAS rules may subject a violator to sanctions including, but not limited to, substantial monetary forfeitures. Use of FM Boosters for Geo-Targeting. By NPRM released December 1, 2020, the FCC sought comment on whether to modify the FCC’s rules governing the operation of FM booster stations by FM radio broadcasters in certain limited circumstances. Through its NPRM, the FCC sought comment regarding changes to the booster station rules that could enable FM broadcasters to use FM booster stations to air “geo-targeted” content (e.g., news, weather, and advertisements) independent of the signals of the booster’s primary station within different portions of the primary station’s protected service contour for a limited period of time during the broadcast hour. The Company cannot predict whether the FCC will adopt the proposed rules, and if adopted, whether the Company would use FM booster stations in this manner. The Company currently has no FM booster stations. Digital Audio Radio Satellite Service and Internet Radio. In adopting its rules for the Digital Audio Radio Satellite Service (“DARS”) in the 2310 - 2360 MHz frequency band, the FCC stated, “although healthy satellite DARS systems are likely to have some adverse impact on terrestrial radio audience size, revenues and profits, the record does not demonstrate that licensing satellite DARS would have such a strong adverse impact that it threatens the provision of local service.” The FCC granted two nationwide licenses, one to XM Satellite Radio, which began broadcasting in May 2001, and a second to Sirius Satellite Radio, which began broadcasting in February 2002. The satellite radio systems provide multiple channels of audio programming in exchange for the payment of a subscription fee. The FCC approved the application of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. to transfer control of the licenses and authorizations held by the two companies to one company, which is now known as Sirius XM Radio, Inc. Various companies have introduced devices that permit the reception of audio programming streamed over the Internet on home computers and on portable receivers such as cell phones, in automobiles, and through so-called “smart speakers” like Amazon’s Alexa service. A number of digital music providers have developed and are offering their product through the Internet. Terrestrial radio operators (including the Company) are also making their product available through the Internet. To date, the Company has not perceived negative economic impact from DARS or Internet- streamed audio on the Company’s full-service stations and FM translators, possibly due, in part, to the possibility of confusion in the digital advertising market, but the Company cannot predict whether there will be future negative economic impact. 17 In-Band On-Channel “Hybrid Digital” Radio. The FCC’s rules permit radio stations to broadcast using in-band, on-channel (IBOC) technology that allows AM and FM stations to operate using the IBOC system developed by iBiquity Digital Corporation. This technology has become commonly known as “hybrid digital” or HD radio. Stations broadcast the same main channel program material in both analog and digital modes. HD radio technology permits “hybrid” operations, the simultaneous transmission of analog and digital signals with a single AM and FM channel. HD radio technology can provide near CD-quality sound on FM channels and FM quality on AM channels. HD radio technology also permits the transmission of up to three additional program streams over the radio stations (which streams do not count as separate radio stations under the multiple ownership rules.) At the present time, we are configured to broadcast in HD radio on 53 stations. On October 28, 2020, the FCC released a Report and Order, in which it adopted rules (effective January 4, 2021) to allow AM radio stations to broadcast an all-digital signal using the HD Radio in-band on- channel (IBOC) mode termed “MA3.” In adopting the new rules, the FCC said that a voluntary conversion to all- digital broadcasting will benefit many AM stations and their listeners by improving reception quality and listenable coverage in stations’ service areas. At this time, the Company has not made a decision on whether to convert any of its AM radio stations to all-digital operation. Use of FM Translators by AM Stations and Digital Program Streams. FM translator stations are relatively low power radio stations (maximum ERP: 250 Watts) that rebroadcast the programs of full-power AM and FM stations on a secondary basis, meaning they must terminate or modify their operation if they cause interference to a full-power station. The FCC permits AM stations to be rebroadcast on FM translator stations in order to improve reception of programs broadcast by AM stations. The Company intends to continue to use some of its existing FM translators in connection with some of its AM stations. The Company is using some of its existing FM translators to rebroadcast HD radio program streams generated by some of its FM stations, which is permitted by the FCC. In a 2015 Report and Order, Revitalization of the AM Service, the FCC announced an opportunity, restricted to AM licensees and permittees, to apply for and receive authorizations to relocate existing FM translator stations within 250 miles for the sole and limited purpose of enhancing their existing service to the public. To implement this policy, the FCC opened “filing windows,” the last one closing October 31, 2016. Some of the Company’s subsidiaries that are AM licensees, acquired FM translators during the filing window, and relocated them to their local markets to pair with some of the Company’s AM broadcast stations. The FM translators so acquired must rebroadcast the related AM station for at least four years, not counting any periods of silence. The FCC later opened two windows for the filing of applications for construction permits for new FM translators, the final window closing January 31, 2018. In the filing windows, qualifying AM licensees could apply for one, and only one, new FM translator station, in the non-reserved FM band to be used solely to re-broadcast the licensee’s AM signal to provide fill-in and/or nighttime service on a permanent basis. The Company filed applications in both windows and obtained some construction permits as a result. If the Company should decide that a subsidiary should sell or suspend operations of an AM station with such an FM construction permit or license, the subsidiary would also be required to sell or suspend operations of the FM translator. The FCC has adopted rules regarding FM translator interference (1) allowing FM translators to resolve interference issues by changing channels to any available same-band frequency using a minor modification application; (2) standardizing the information that must be compiled and submitted by a station claiming interference from an FM translator, including a required minimum number of listener complaints; (3) establishing interference complaint resolution procedures; and (4) establishing an outer contour limit (45 dBμ) for the affected station within which interference complaints will be considered actionable while providing for a process to waive that limit in special circumstances. Because FM translators are “secondary services,” they could be displaced by full power stations. 18 Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Federal Trade Commission and the Department of Justice, the federal agencies responsible for enforcing the federal antitrust laws, may investigate certain acquisitions. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, an acquisition meeting certain size thresholds requires the parties to file Notification and Report Forms with the Federal Trade Commission and the Department of Justice and to observe specified waiting period requirements before consummating the acquisition. Any decision by the Federal Trade Commission or the Department of Justice to challenge a proposed acquisition could affect our ability to consummate the acquisition or to consummate it on the proposed terms. We cannot predict whether the FCC will adopt rules that would restrict our ability to acquire additional stations. Changes to Application and Assignment Procedures. FCC rules give Native American tribes a priority to obtain broadcast radio licenses in tribal communities. The rules provide an opportunity for tribes to establish new service specifically designed to offer programming that meets the needs of tribal citizens. In addition, the rules modified the FCC’s radio application and assignment procedures, assisting qualified applicants to more rapidly introduce new radio service to the public. These modifications (1) prohibit an AM applicant that obtains a construction permit through a dispositive Section 307(b) preference from downgrading the service level that led to the dispositive preference; (2) require technical proposals for new or major change AM facilities filed with Form 175 (i.e., FCC “short-form” Auction) applications to meet certain minimum technical standards to be eligible for further auction processing; and (3) give FCC operating bureaus authority to cap filing window applications. In 2011, the FCC released its Third Report and Order which limits eligibility for authorizations associated with allotments added to the FM Table of Allotments using the “Tribal Priority” to the tribes whom the Tribal Priority was intended to benefit. In October 2018, the FCC released a “Second Further Notice of Proposed Rulemaking” as part of its ongoing effort to assist AM broadcast stations in providing full-time service to their communities. The FCC sought comment on technical proposals to reduce nighttime interference afforded to wide-area “Class A” AM radio stations to enable more local AM stations to increase their nighttime service. The Company has no Class A AM radio stations, but has Class B, Class C and Class D AM radio stations, some of which might benefit if the FCC changes its rules as proposed. 19 The Company pays for the use of music broadcast on its stations by obtaining licenses from organizations called performing rights organizations (e.g. BMI, ASCAP, SESAC and GMR), which, in turn pay composers, authors and publishers for their works. Federal law grants a performance right for sound recordings in favor of recording companies and performing artists for non-interactive digital transmissions and Internet radio. As a result, users of music, including the Company, are required to pay royalties for these uses through Sound Exchange, a non-profit performance rights organization. Periodically, bills have been introduced in Congress, that if passed, would have required the Company to pay additional fees to an organization called MusicFirst which would distribute the money to other entities. Efforts continue by certain organizations to persuade Congress to enact a law that would require such payments. Periodically, bills have been introduced in Congress that, if adopted, would require the Company to pay additional fees to one or more organizations that would distribute the money to performers or other entities. In late 2018, Congress passed the “Music Modernization Act” which was signed into law by the President. The law (1) improves compensation to songwriters and streamlining how their music is licensed; (2) enables legacy artists (who recorded music before 1972) to be paid royalties when their music is played on digital radio; and (3) provides a consistent legal process for studio professionals, including record producers and engineers to receive royalties for their contributions to music that they help to create. The law creates a blanket license for digital music providers to make permanent downloads, limited downloads, and interactive streams, creates a collective to administer the blanket license, and makes various improvements to royalty rate proceedings. This new law could impose an additional financial burden on the Company, but the extent of the burden would depend on how the fee payment requirement was structured. The American Music Fairness Act was introduced on June 24, 2021, in the House of Representatives (117th Congress) and would establish that the copyright holder of a sound recording would have the exclusive right to perform the sound recording through an audio transmission and addresses other related issues. (Currently, the public performance right only covers performances through a digital audio transmission in certain instances, which means that nonsubscription terrestrial radio stations generally do not have to secure a license to publicly perform a copyright-protected sound recording.). Under the bill, a nonsubscription broadcast transmission would be required to have a license to publicly perform such sound recordings. The Copyright Royalty Board would periodically determine the royalty rates for such a license. When determining the rates, the board would be required to base its decision on certain information presented by the parties, including the radio stations’ effect on other streams of revenue related to the sound recordings. Terrestrial broadcast stations, and the owners of such stations) that fall below certain revenue thresholds would pay certain flat fees, instead of the board-established rate, for a license to publicly perform copyright-protected sound recordings. On January 3, 2013, the FCC released the Sixth Further Notice of Proposed Rulemaking , which sought comment on the requirement that persons with attributable interests in broadcast licensees and other entities filing an FCC Ownership Report provide an “FCC Registration Number” (“FRN”) linked to their social security numbers. Questions had been raised about the security of the FCC’s Registration System where this data would be stored. On January 20, 2016, the FCC released its Report and Order, Second Report and Order and Order on Reconsideration that implemented a Restricted Use FRN (RUFRN) that individuals may use solely for the purpose of broadcast ownership report filings. The FCC stated its belief that the RUFRN would allow for sufficient unique identification of individuals listed on broadcast ownership reports without necessitating the disclosure to the FCC of individuals’ full Social Security Numbers (SSNs). The FCC eliminated the availability of the Special Use FRN (SUFRN) for broadcast station ownership reports, except in very limited circumstances. On January 4, 2017, the FCC’s Media Bureau issued an Order on Reconsideration denying petitions for reconsideration of the requirement, but on February 2, 2017, the FCC set aside the Order on Reconsideration and returned the petitions for reconsideration to pending status to be considered by the full FCC. The FCC is also seeking comment on whether to expand the biennial ownership reporting requirement to include interests, entities and individuals that are not attributable because of (a) the single majority shareholder exemption and (b) the exemption for interests held in eligible entities pursuant to the higher EDP threshold. The Company has utilized the single majority shareholder exemption in reporting ownership interests in the Company. The Company cannot predict whether these proposals will be adopted, and if so, whether information provided by those persons with a reportable attributable interest in the Company will be secure. 20 Proposed Changes. The FCC has under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect us and the operation and ownership of our broadcast properties. Application processing rules adopted by the FCC might require us to apply for facilities modifications to our standard broadcast stations in future “window” periods for filing applications or result in the stations being “locked in” with their present facilities. The FCC is authorized to use auctions for the allocation of radio broadcast spectrum frequencies for commercial use. The implementation of this law could require us to bid for the use of certain frequencies. Information About Our Executive Officers Our current executive officers are: Name Age Position Edward K. Christian . . . . Samuel D. Bush . . . . . . . . Marcia K. Lobaito . . . . . . Catherine A. Bobinski . . . Christopher S. Forgy . . . . 77 President, Chief Executive Officer and Chairman; Director 64 Senior Vice President, Treasurer and Chief Financial Office r 73 Corporate Secretary 62 Senior Vice President/Finance, Chief Accounting Officer and Corporate Controller 61 Senior Vice President of Operations Officers are elected annually by our Board of Directors and serve at the discretion of the Board. Set forth below is information with respect to our executive officers. Mr. Christian has been President, Chief Executive Officer and Chairman since our inception in 1986. Mr. Bush has been Senior Vice President since 2002 and Chief Financial Officer and Treasurer since September 1997. He was Vice President from 1997 to 2002. From 1988 to 1997 he held various positions with the Media Finance Group at AT&T Capital Corporation, including senior vice president. Ms. Lobaito was the Director of Business Affairs and Corporate Secretary since our inception in 1986, Vice President from 1996 to 2005 and Senior Vice President from 2005 to 2020. Effective March 13, 2020, Ms. Lobaito retired from Senior Vice President and Director of Business Affairs. At our request, Ms. Lobaito continues to serve as Corporate Secretary. On September 28, 2021, Ms. Lobaito was appointed to our Board of Directors. Ms. Bobinski has been Senior Vice President/Finance since March 2012 and Chief Accounting Officer and Corporate Controller since September 1991. She was Vice President from March 1999 to March 2012. Ms. Bobinski is a certified public accountant. Mr. Forgy has been Senior Vice President of Operations since May 2018. He was President/General Manager of our Columbus, Ohio market from 2010 to 2018 and was Director of Sales of our Columbus, Ohio market from 1995 to 2006. He has been with Saga for 20 years. 21 Item 1A. Risk Factors The more prominent risks and uncertainties inherent in our business are described in more details below. However, these are not the only risks and uncertainties we face. Our business may also face additional risks and uncertainties that are unknown to us at this time. Risks Related to the Economy Global Economic Conditions and Uncertainties May Continue to Affect our Business We derive revenues from the sale of advertising and expenditures by advertisers tend to be cyclical and are reflective of economic conditions. Periods of a slowing economy, recession or economic uncertainty may be accompanied by a decrease in advertising. The global economic recession that began in 2008 caused a decline in advertising and marketing by our customers, which had an adverse effect on our revenue, profit margins and cash flows. Global economic conditions were slow to recover and remain uncertain. There can be no assurance that any of the economic improvements since the recession will be broad based and sustainable, especially in light of the further negative impact of the COVID - 19 pandemic, or that they will enhance conditions in markets relevant to us. If economic conditions do not continue to improve, economic uncertainty increases or economic conditions deteriorate again, global economic conditions may once again adversely impact our business. Due to the continued uncertain pace of economic growth, we cannot predict future revenue trends. Further, there can be no assurance that we will not experience future adverse effects that may be material to our cash flows, competitive position, financial condition, results of operations, or our ability to access capital. The volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to do so, which could have an impact on our flexibility to react to changing economic and business conditions. Accordingly, if the economy does not fully recover or worsens, our business, results of operations and financial condition could be materially and adversely affected. Our Business and Operations Could be Adversley Affected by Health Epidemics, such as the COVID - 19 Pandemic, Impacting the Markets and Communities in which we and our Partners, Advertisers, and Users Operate We face various risks related to health epidemics, pandemics and similar outbreaks, such as the global outbreak of COVID - 19. The ongoing COVID - 19 pandemic and the measures taken to address the public health concerns resulting from the pandemic have resulted in disruptions to our business activity, volatility in the equity markets and credit markets, and uncertainty in the U.S. and global economic outlook. Such measures include travel restrictions and national border closings, restrictions on the conduct of non-essential business, closures of workplaces and schools, quarantines, shelter-in-place orders and social distancing orders. The measures have impacted and may further impact our business. Recently implemented restrictions on business activity and uncertainty in the U.S. and global economic outlook has caused advertisers to adjust their purchasing plans and a deterioration in economic conditions globally and in the markets in which we operate may cause advertisers to reduce further purchases of advertising. Furthermore, this level of uncertainty may adversely affect our ability to develop information in order to prepare accurate financial forecasts. In addition, restrictive measures imposed by federal, state and local authorities in the United States as well as health- related concerns related to working conditions, have had, and may continue to have an impact on our business operations. While we are not currently anticipating any material impact to our internal ability to operate our business as a result of the COVID - 19 pandemic, we may temporarily lose the services of employees or experience interruptions in the normal conduct of businesses or operations of our systems, which could lead to inefficiencies, and disruptions of our regular operations. 22 Although we have undertaken a number or steps to mitigate the impact of the COVID - 19 pandemic on our business, including a series of initiatives to control or reduce costs, such cost control measures are unlikely to completely offset declines in revenues. The extent to which COVID - 19 impacts our business and financial position will depend on future developments, which are difficult to predict, including the severity and scope of the COVID - 19 outbreak as well as types of measures imposed by governmental authorities to contain the virus or address its impact and the duration of those actions and measures. We Depend on Key Stations Historically our top five markets when combined represented 39%, 40%, and 39% of our net operating revenue for the years ended December 31, 2021, 2020 and 2019, respectively. Accordingly, we may have greater exposure to adverse events or conditions that affect the economy in any of these markets, which could have a material adverse effect on our revenue, results of operations and financial condition. Local, National and Global Economic Conditions May Affect our Advertising Revenue Our financial results are dependent primarily on our ability to generate advertising revenue through rates charged to advertisers. The advertising rates a station is able to charge are affected by many factors, including the general strength of the local and national economies. Generally, advertising declines during periods of economic recession or downturns in the economy. Our revenue has been and is likely to be adversely affected during such periods, whether they occur on a global level, national level or in the geographic markets in which we operate. During such periods we may also be required to reduce our advertising rates in order to attract available advertisers. Such a decline in advertising rates could also have a material adverse effect on our revenue, results of operations and financial condition. The ongoing supply chain and labor shortage issues could result in an adverse impact on our business due to our customer’s reduction in advertising spending as their businesses are negatively impacted by low inventories, product delays, and labor shortages resulting in reduced revenue. The Russian invastion of Ukraine has created not only great devastation but also a worldwide instability that could impact economies across the globe. While direct impacts to our business are limited, the indirect impacts to our customers could impact demand for advertising and other indirect impacts could arise. In addition, the impact of other current macro-economic factors on our business, including inflation, supply chain constraints and geopolitical events, is uncertain. Risks Related to Our Financing We Have Substantial Indebtedness and Debt Service Requirements While we currently have no debt outstanding at December 31, 2021 we have previously borrowed and may borrow to finance acquisitions and for other corporate purposes. If we borrow in the future, our leverage could make us vulnerable to an increase in interest rates, a downturn in our operating performance, or a decline in general economic conditions. Our credit facility is subject to mandatory prepayment requirements, including but not limited to, certain sales of assets, certain insurance proceeds, certain debt issuances and certain sales of equity. Any outstanding balance under the credit facility will be due on the maturity date of June 27, 2023. We believe that cash flows from operations will be sufficient to meet any debt service requirements for interest and scheduled payments of principal under the credit facility in the future. However, if such cash flow is not sufficient, we may be required to sell additional equity securities, refinance our obligations or dispose of one or more of our properties in order to make such scheduled payments. We cannot be sure that we would be able to affect any such transactions on favorable terms, if at all. 23 The expected London Inter-Bank Offered Rate (“LIBOR”) phase-out may have unpredictable impacts on contractual mechanics in the credit markets or the broader financial markets, which could have an adverse effect on our results of operations. LIBOR will no longer be used to price new loans after December 31, 2021 although existing loans may continue to use LIBOR in determining loan interest rates until June 2023, which coincides with the maturity date of our current credit facility. In the United States, the U.S. Federal Reserve Board-led industry group, the Alternative Reference Rates Committee, selected the Secured Overnight Financing Rate (“SOFR”) as an alternative to LIBOR for U.S. dollar- denominated LIBOR-benchmarked obligations. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S treasury repo market, and the Federal Reserve Bank of New York has published the daily rate since 2018 and will likely be used in any future credit facilities entered into. Our Debt Covenants Restrict our Financial and Operational Flexibility Our credit facility contains a number of financial covenants which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances. Our ability to meet these financial ratios can be affected by operating performance or other events beyond our control, and we cannot assure you that we will meet those ratios. Certain events of default under our credit facility could allow the lenders to declare all amounts outstanding to be immediately due and payable and, therefore, could have a material adverse effect on our business. We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the credit facility and each of our subsidiaries has guaranteed the credit facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the credit facility. Risks Related to the Radio Broadcasting Industry Our Stations Must Compete for Advertising Revenues in Their Respective Markets Radio broadcasting is a highly competitive business. Our stations compete for listeners and advertising revenues within their respective markets directly with other radio stations, as well as with other media, such as broadcast radio (as applicable), cable television and/or radio, satellite television and/or satellite radio systems, newspapers, magazines, direct mail, the Internet, coupons and billboard advertising. Audience ratings and market shares are subject to change, and any change in a particular market could have a material adverse effect on the revenue of our stations located in that market. While we already compete in some of our markets with other stations with similar programming formats, if another radio station in a market were to convert its programming format to a format similar to one of our stations, if a new station were to adopt a comparable format or if an existing competitor were to strengthen its operations, our stations could experience a reduction in ratings and/or advertising revenue and could incur increased promotional and other expenses. Other radio broadcasting companies may enter into the markets in which we operate or may operate in the future. These companies may be larger and have more financial resources than we have. We cannot assure you that any of our stations will be able to maintain or increase their current audience ratings and advertising revenues. We Depend on Key Personnel Our business is partially dependent upon the performance of certain key individuals, particularly Edward K. Christian, our President and CEO. Although we have entered into employment and non-competition agreements with Mr. Christian, which terminate on March 31, 2027, and certain other key personnel, including on-air personalities, we cannot be sure that such key personnel will remain with us. We can give no assurance that all or any of these employees will remain with us or will retain their audiences. Many of our key employees are at-will employees who are under no legal obligation to remain with us. Our competitors may choose to extend offers to any of these individuals on terms which we may be unwilling to meet. In addition, any or all of our key employees may decide to leave for a variety of personal or other reasons beyond our control. Furthermore, the popularity and audience loyalty of our key on-air personalities is highly sensitive to rapidly changing public tastes. A loss of such popularity or audience loyalty is beyond our control and could limit our ability to generate revenues. 24 Our Success Depends on our Ability to Identify and Integrate Acquired Stations As part of our strategy, we have pursued and may continue to pursue acquisitions of additional radio stations, subject to the terms of our credit facility. Broadcasting is a rapidly consolidating industry, with many companies seeking to consummate acquisitions and increase their market share. In this environment, we compete and will continue to compete with many other buyers for the acquisition of radio stations. Some of those competitors may be able to outbid us for acquisitions because they have greater financial resources or for other reasons. As a result of these and other factors, our ability to identify and consummate future acquisitions is uncertain. Our consummation of all future acquisitions is subject to various conditions, including FCC and other regulatory approvals. The FCC must approve any transfer of control or assignment of broadcast licenses. Such acquisitions could be delayed by shutdowns of the U.S. Government. In addition, acquisitions may encounter intense scrutiny under federal and state antitrust laws. Our future acquisitions may be subject to notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and to a waiting period and possible review by the Department of Justice and the Federal Trade Commission. Any delays, injunctions, conditions or modifications by any of these federal agencies could have a negative effect on us and result in the abandonment of all or part of otherwise attractive acquisition opportunities. We cannot predict whether we will be successful in identifying future acquisition opportunities or what the consequences will be of any acquisitions. Certain of our acquisitions may prove unprofitable and fail to generate anticipated cash flows. In addition, the success of any completed acquisition will depend on our ability to effectively integrate the acquired stations. The process of integrating acquired stations may involve numerous risks, including difficulties in the assimilation of operations, the diversion of management’s attention from other business concerns, risk of entering new markets, and the potential loss of key employees of the acquired stations. Risks Related to Regulation of Our Business Future Impairment of our FCC Broadcasting Licenses Could Affect our Operating Results As of December 31, 2021, our FCC broadcasting licenses represented 36% of our total assets. We are required to test our FCC broadcasting licenses for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our FCC broadcasting licenses might be impaired which may result in future impairment losses. For further discussion, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates included with this Form 10 - K. On January 24, 2020, the President signed into law the “PIRATE” Act which authorizes the FCC to fine illegal broadcasters up to $2 million. However, according to a January 4, 2021, Report from the FCC’s Enforcement Bureau, the FCC has received no funding to implement the PIRATE Act. The Congressional Budget Office and the FCC both estimated that it would cost $11 million for the Commission to implement the Act, but the PIRATE Act itself contained no appropriation or other funding source to cover its implementation costs. Our Business is Subject to Extensive Federal Regulation The broadcasting industry is subject to extensive federal regulation which, among other things, requires approval by the FCC of transfers, assignments and renewals of broadcasting licenses, limits the number of broadcasting properties that may be acquired within a specific market, and regulates programming and operations. For a detailed description of the material regulations applicable to our business, see “Federal Regulation of Radio Broadcasting” and “Other FCC Requirements” in Item 1 of this Form 10 - K. Failure to comply with these regulations could, under certain circumstances and among other things, result in the denial of renewal or revocation of FCC licenses, shortened license renewal terms, monetary forfeitures or other penalties which would adversely affect our profitability. Changes in ownership requirements could limit our ability to own or acquire stations in certain markets. 25 New Federal Regulations or Fees Could Affect our Broadcasting Operations There has been proposed legislation in the past and there could be again in the future that requires radio broadcasters to pay additional fees such as a spectrum fee for the use of the spectrum or a royalty fee to record labels and performing artists for use of their recorded music. Currently, we pay royalties to song composers, publishers, and performers indirectly through third parties. Any proposed legislation that is adopted into law could add an additional layer of royalties to be paid directly to the record labels and artists. While this proposed legislation did not become law, it has been the subject of considerable debate and activity by the broadcast industry and other parties affected by the legislation. It is currently unknown what impact any potential required royalty payments would have on our results of operations, cash flows or financial position. The FCC’s Vigorous Enforcement of Indecency Rules Could Affect our Broadcasting Operations Federal law regulates the broadcast of obscene, indecent or profane material. The FCC has increased its enforcement efforts relating to the regulation of indecency violations, and Congress has increased the penalties for broadcasting obscene, indecent or profane programming, and these penalties may potentially subject broadcasters to license revocation, renewal or qualification proceedings in the event that they broadcast such material. The FCC has expanded the scope of items considered indecent to include material that coud be considered “blasphemy,” “personally reviling epithets,” “profanity” and vulgar or coarse words, amounting to a nuisance. The maximum forfeiture penalty (after 2021 annual inflation adjustment) for an indecency violation is $445,445 per incident and $4,111,796 for a continuing violation arising from a single act or failure to act. In March 2015, the FCC issued a Notice of Apparent Liability for the then maximum forfeiture amount of $325,000 against a television station for violation of the indecency laws. In addition, the FCC’s heightened focus on the indecency regulations against the broadcast industry may encourage third parties to oppose our license renewal applications or applications for consent to acquire broadcast stations. Because the FCC may investigate indecency complaints prior to notifying a licensee of the existence of a complaint, a licensee may not have knowledge of a complaint unless and until the complaint results in the issuance of a formal FCC letter of inquiry or notice of apparent liability for forfeiture. We may in the future become subject to inquiries or proceedings related to our stations’ broadcast of obscene, indecent or profane material. To the extent that any inquiries or other proceedings result in the imposition of fines, a settlement with the FCC, revocation of any of our station licenses or denials of license renewal applications, our result of operations and business could be materially adversely affected. Risks Related to Technology and Cybersecurity New Technologies May Affect our Broadcasting Operations The FCC has and is considering ways to introduce new technologies to the broadcasting industry, including satellite and terrestrial delivery of digital audio broadcasting and the standardization of available technologies which significantly enhance the sound quality of AM broadcasters. We are unable to predict the effect such technologies may have on our broadcasting operations. The capital expenditures necessary to implement such technologies could be substantial. 26 Information Technology and Cybersecurity Failures or Data Security Breaches Could Harm Our Business Any internal technology error or failure impacting systems hosted internally or externally, or any large-scale external interruption in technology infrastructure we depend on, such as power, telecommunications or the Internet, may disrupt our technology network. Any individual, sustained or repeated failure of technology could impact our customer service and result in increased costs or reduced revenues. Our technology systems and related data also may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. While we have in place, and continue to invest in, technology security initiatives and disaster recovery plans, these measures may not be adequate or implemented properly to prevent a business disruption and its adverse financial impact and consequences to our business’ reputation. In addition, as a part of our ordinary business operations, we may collect and store sensitive data, including personal information of our clients, listeners and employees. The secure operation of the networks and systems on which this type of information is stored, processed and maintained is critical to our business operations and strategy. Any compromise of our technology systems resulting from attacks by hackers or breaches due to employee error or malfeasance could result in the loss, disclosure, misappropriation of or access to clients’, listeners’, employees’ or business partners’ information. Any such loss, disclosure, misappropriation or access could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and damage our reputation, any or all of which could adversely affect our business. To meet business objectives, the Company relies on both internal information technology (IT) systems and networks, and those of third parties and their vendors, to process and store sensitive data, including confidential research, business plans, financial information, intellectual property, and personal data that may be subject to legal protection. The extensive information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability of these IT systems and networks, and the confidentiality, integrity, and availability of the Company’s sensitive data. The Company continually assesses these threats and makes investments to increase internal protection, detection, and response capabilities, as well as ensure the Company’s third-party providers have required capabilities and controls, to address this risk. In September 2021, one of our third-party service providers of a critical application used in our business, was the victim of a ransomware cyberattack. However, the Company’s data was not breached in connection with this incident and the incident did not have a material impact on the Company’s business or operations. To date, the Company has not experienced any material impact to the business or operations resulting from information or cybersecurity attacks; however, because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there remains the potential for the Company to be adversely impacted. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. The Company currently maintains cybersecurity insurance in the event of an information security or cyber incident, however, the coverage may not be sufficient to cover all financial losses nor may it be available in the future. 27 Risks Related to the Ownership of Our Stock The Company is Controlled by our President, Chief Executive Officer and Chairman As of March 4, 2022, Edward K. Christian, our President, Chief Executive Officer and Chairman, holds approximately 66% of the combined voting power of our Common Stock (not including options to acquire Class B Common Stock and based on Class B Common Stock generally being entitled to ten votes per share). As a result, Mr. Christian generally is able to control the vote on most matters submitted to the vote of stockholders and, therefore, is able to direct our management and policies, except with respect to (i) the election of the two Class A directors, (ii) those matters where the shares of our Class B Common Stock are only entitled to one vote per share, and (iii) other matters requiring a class vote under the provisions of our certificate of incorporation, bylaws or applicable law. For a description of the voting rights of our Common Stock, see Note 11 of the Notes to Consolidated Financial Statements included with this Form 10 - K. Without the approval of Mr. Christian, we will be unable to consummate transactions involving an actual or potential change of control, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices. We May Experience Volatility in the Market Price of our Common Stock The market price of our common stock has fluctuated in the past and may continue to be volatile. In addition to stock market fluctuations due to economic or other factors, the volatility of our shares may be influenced by lower trading volume and concentrated ownership relative to many of our publicly-held competitors. Because several of our shareholders own significant portions of our outstanding shares, our stock is relatively less liquid and therefore more susceptible to price fluctuations than many other companies’ shares. If these shareholders were to sell all or a portion of their holdings of our common stock, then the market price of our common stock could be negatively affected. Investors should be aware that they could experience short-term volatility in our stock if such shareholders decide to sell all or a portion of their holdings of our common stock at once or within a short period of time. Item 1B. Unresolved Staff Comments None. Item 2. Properties Our corporate headquarters is located in Grosse Pointe Farms, Michigan. The types of properties required to support each of our stations include offices, studios, and transmitter and antenna sites. A station’s studios are generally housed with its offices in business districts. The transmitter sites and antenna sites are generally located so as to provide maximum market coverage for our stations’ broadcast signals. As of December 31, 2021, the studios and offices of 25 of our 28 operating locations, including our corporate headquarters in Michigan, are located in facilities we own. The remaining studios and offices are located in leased facilities with lease terms that expire in 0.7 years to 2.9 years. We own or lease our transmitter and antenna sites, with lease terms that expire in 1 year to 69 years. We do not anticipate any difficulties in renewing those leases that expire within the next five years or in leasing other space, if required. No one property is material to our overall operations. We believe that our properties are in good condition and suitable for our operations. We own substantially all of the equipment used in our broadcasting business. 28 Item 3. Legal Proceedings The Company is subject to various outstanding claims which arise in the ordinary course of business, and to other legal proceedings. Management anticipates that any potential liability of the Company, which may arise out of or with respect to these matters, will not materially affect the Company’s financial statements. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Class A Common Stock trades on the NASDAQ Global Market of the NASDAQ Stock Market LLC under the ticker symbol SGA. There is no public trading market for our Class B Common Stock. The closing price for our Class A Common Stock on March 4, 2022 as reported by the NASDAQ was $22.45. As of March 4, 2022, there were approximately 166 holders of record of our Class A Common Stock, and one holder of our Class B Common Stock. Dividends During 2021, our Board of Directors declared three quarterly cash dividends and a special dividend totaling $0.98 per share on its Classes A and B shares. These dividends totaling approximately $5.9 million were accrued or paid during 2021. See Note 1 of the financial statements for specific details on the dividends. During 2020, our Board of Directors declared one quarterly cash dividends totaling $0.32 per share on its Classes A and B shares. These dividends totaling approximately $1.9 million were paid during 2020. In the second quarter of 2020, our Board of Directors announced that it was temporarily suspending the quarterly cash dividend in response to the continued uncertainty of the ongoing impact of COVID - 19. See Note 1 of the financial statements for specific details on the dividends. During 2019, our Board of Directors declared four quarterly cash dividends totaling $1.20 per share on its Classes A and B shares. These dividends totaling approximately $7.1 million were accrued or paid during 2019. See Note 1 of the financial statements for specific details on the dividends. The Company currently intends to pay regular quarterly cash dividends in the future as declared by the Board of Directors. Consisten with returning value to our shareholders, the Board of Directors may also consider declaring special cash dividends, stock dividends, and stock buybacks in the future. 29 Securities Authorized for Issuance Under Equity Compensation Plan Information The following table sets forth as of December 31, 2021, the number of securities outstanding under our equity compensation plans, the weighted average exercise price of such securities and the number of securities available for grant under these plans: (a) (b) Number of Shares to be Issued Upon Exercise of Outstanding Weighted-Average Exercise Price of Options Outstanding Options, (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Column (a)) Plan Category Warrants, and Rights Warrants and Rights Equity Compensation Plans Approved by Stockholders: Employees’ 401(k) Savings and Investment Plan . . . 2005 Incentive Compensation Plan . . . . . . . . . . . . . . Equity Compensation Plans Not Approved by Stockholders: None . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 100,609 (1) $ — — (2) 520,665 251,069 — 100,609 — 771,734 (1) All 100,609 shares are restricted stock. (2) Weighted-Average Exercise Price of Outstanding Options is $0.00 as they are all restricted stock. Recent Sales of Unregistered Securities Not applicable. 30 Issuer Purchases of Equity Securities The following table summarizes our repurchases of our Class A Common Stock during the three months ended December 31, 2021. Shares repurchased during the quarter were from the retention of shares for the payment of withholding taxes related to the vesting of restricted stock. Total Number Approximate Period October 1 - October 31, 2021 . . . . . . . . . . . . . . . . . . . . November 1 - November 30, 2021 . . . . . . . . . . . . . . . . December 1 - Decemer 31, 2021 . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of Shares Purchased as Part of Publicly Average Price Paid per Announced Dollar Value of Shares that May Yet be Purchased Under the Program(2) Total Number of Shares Purchased (1) Share Program — $ — 16,577 $ 26.25 — 16,577 $ 26.25 — $ — $ — $ — $ — $ 18,785,315 18,350,169 18,350,169 18,350,169 (1) All shares were purchased other than through a publicly announced plan or program. The shares were forfeited to the Company for payment of tax withholding obligations related to the vesting of restricted stock. (2) We have a Stock Buy-Back Program which allows us to purchase our Class A Common Stock. In February 2013, our Board of Directors authorized an increase in the amount committed to the Buy-Back Program from $60 million to approximately $75.8 million. Performance Graph We are a smaller reporting company as defined by Rule 12b - 2 of the Securities Exchange Act of 1934 and are no longer required to provide a performance graph. Item 6. [Reserved] 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with Item 1. Business and the consolidated financial statements and notes thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere herein. The following discussion is presented on a consolidated basis. We serve twenty-seven radio markets (reporting units) that aggregate into one operating segment (Radio), which also qualifies as a reportable segment. We operate under one reportable busines segment for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance. Corporate general and administrative expenses, interest expense, write-off debt issuance costs, other (income) expense, and income tax provision are managed on a consolidated basis. The discussion of our operating performance focuses on station operating income because we manage our stations primarily on station operating income. Operating performance is evaluated for each individual market. We use certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP) to assess our financial performance. For example, we evaluate the performance of our markets based on “station operating income” (operating income plus corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets). Station operating income is generally recognized by the broadcasting industry as a measure of performance, is used by analysts who report on the performance of the broadcasting industry and it serves as an indicator of the market value of a group of stations. In addition, we use it to evaluate individual stations, market-level performance, overall operations and as a primary measure for incentive based compensation of executives and other members of management. Station operating income is not necessarily indicative of amounts that may be available to us for debt service requirements, other commitments, reinvestment or other discretionary uses. Station operating income is not a measure of liquidity or of performance in accordance with GAAP, and should be viewed as a supplement to, and not a substitute for, our results of operations presented on a GAAP basis. COVID - 19 Impact and Response The COVID - 19 pandemic has resulted in a widespread health crisis that has adversely affected business, economies and financial markets worldwide. During 2021, the effects of the COVID - 19 pandemic and related actions by governments to attempt to contain the spread of the virus have continued to impact our business. Despite the development of vaccines and more effective treatments for the physical impacts of COVID - 19, there are no reliable estimates of how long the COVID - 19 pandemic, and its negative effect on our business, will last. Therefore, the unpredictability of the current economic and public health conditions continues. However, all of our markets are functioning at effectively full capacity, subject to ongoing health and safety protocols, which vary from state-to-state and we have continued to increase the number of our non-spot events again. As we exit 2021, we remain optimistic about future advertising revenue. General We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties. We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. We review acquisition opportunities on an ongoing basis. 32 Radio Stations Our radio stations’ primary source of revenue is from the sale of advertising for broadcast on our stations. Depending on the format of a particular radio station, there are a predetermined number of advertisements available to be broadcast each hour. Most advertising contracts are short-term and generally run for a few weeks only. The majority of our revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff. For the years ended December 31, 2021, 2020 and 2019, approximately 89%, 84% and 88%, respectively, of our radio stations’ gross revenue was from local advertising. To generate national advertising sales, we engage independent advertising sales representative firms that specialize in national sales for each of our broadcast markets. Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. Political revenue was significantly lower in 2021 and 2019 due to the decreased number of national, state, and local elections in most of our markets as compared to 2020. Our gross political revenue for the years ended December 31, 2021, 2020 and 2019 was $1,780,000, $6,890,000 and $885,000, respectively. We expect political revenue in 2022 to increase over 2021 levels as a result of more elections in 2022 at the local, state and national levels. Our net operating revenue, station operating expense and operating income vary from market to market based upon the market’s rank or size which is based upon population and the available radio advertising revenue in that particular market. The broadcasting industry and advertising in general is influenced by the state of the overall economy, including unemployment rates, inflation, energy prices and consumer interest rates. Our stations broadcast primarily in small to midsize markets. Historically, these markets have been more stable than major metropolitan markets during downturns in advertising spending, but may not experience increases in such spending as significant as those in major metropolitan markets in periods of economic improvement. Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers. In a number of our markets, this is measured by periodic reports generated by independent national rating services. In the remainder of our markets it is measured by the results advertisers obtain through the actual running of an advertising schedule. Advertisers measure these results based on increased demand for their goods or services and/or actual revenues generated from such demand. Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media, and signal strength. When we acquire and/or begin to operate a station or group of stations we generally increase programming and advertising and promotion expenses to increase our share of our target demographic audience. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years. During periods of economic downturns, or when the level of advertising spending is flat or down across the industry, this strategy may result in the appearance that our cost of operations are increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired station or group of stations. The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by the format of a particular radio station. Our stations strive to maximize revenue by constantly managing the number of commercials available for sale and by adjusting prices based upon local market conditions and ratings. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of inventory sell out ratios and pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory. 33 Our radio stations employ a variety of programming formats. We periodically perform market research, including music evaluations, focus groups and strategic vulnerability studies. Because reaching a large and demographically attractive audience is crucial to a station’s financial success, we endeavor to develop strong listener loyalty. Our stations also employ audience promotions to further develop and secure a loyal following. We believe that the diversification of formats on our radio stations helps to insulate us from the effects of changes in musical tastes of the public on any particular format. The primary operating expenses involved in owning and operating radio stations are employee salaries, sales commissions, programming expenses, depreciation, and advertising and promotion expenses. The radio broadcasting industry is subject to rapid technological change, evolving industry standards and the emergence of new media technologies and services. These new technologies and media are gaining advertising share against radio and other traditional media. We are continuing to expand our digital initiative to provide a seamless experience across multiple platforms. Our goal is to allow our listeners to connect with our brands on demand wherever, however, and whenever they choose. We continue to create opportunities through targeted digital advertising and an array of digital services that include online promotions, mobile messaging, and email marketing. During the years ended December 31, 2021, 2020 and 2019, our Columbus, Ohio; Des Moines, Iowa; Milwaukee, Wisconsin, Norfolk, Virginia and Portland, Maine markets, when combined, represented approximately 39%, 40%, and 39%, respectively, of our consolidated net operating revenue. An adverse change in any of these radio markets or relative market position in those markets could have a significant impact on our operating results as a whole. The following tables describe the percentage of our consolidated net operating revenue represented by each of these markets: Percentage of Consolidated Net Operating Revenue for the Years Ended December 31, 2020 2019 2021 Market: Columbus, Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Des Moines, Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Milwaukee, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norfolk, Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portland, Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 % 6 % 11 % 6 % 6 % 10 % 7 % 11 % 6 % 6 % 11 % 6 % 11 % 6 % 5 % 34 During the years ended December 31, 2021, 2020 and 2019, the radio stations in our five largest markets when combined, represented approximately 43%, 52% and 44%, respectively, of our consolidated station operating income. We note that the percent of consolidated station operating income at December 31, 2020 is higher than normal due to the impact of the COVID - 19 pandemic on our markets. As the pandemic is resolved, we would anticipate results by market to continue to be back to normalized amounts in future years. The following tables describe the percentage of our consolidated station operating income represented by each of these markets: Percentage of Consolidated Station Operating Income(*) for the Years Ended December 31, 2020 2019 2021 Market: Columbus, Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Des Moines, Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Milwaukee, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norfolk, Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portland, Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 % 5 % 12 % 7 % 7 % 16 % 7 % 15 % 6 % 8 % 15 % 6 % 12 % 6 % 5 % (*) Operating income plus corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets. Results of Operations The following tables summarize our results of operations for the three years ended December 31, 2021, 2020 and 2019. Consolidated Results of Operations Years Ended December 31, 2019 2021 2020 $ Increase % Increase $ Increase % Increase (Decrease) (Decrease) (Decrease) (Decrease) (In thousands, except %’s and per share information) 2021 vs. 2020 2020 vs. 2019 Net operating revenue . . . . . . . . . $ 108,343 $ 95,813 $ 123,072 $ 12,530 Station operating expense . . . . . . 1,659 83,245 Corporate general and 81,586 92,692 13.1 % $ (27,259) 2.0 % (11,106) (22.1)% (12.0)% administrative . . . . . . . . . . . . . . 10,040 11,574 11,460 (1,534) (13.3)% 114 1.0 % Other operating (income) expense, net . . . . . . . . . . . . . . . Impairment of intangible assets . . Operating income (loss) . . . . . . . . Interest expense . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . Income (loss) before income 7 — 15,051 284 (16) (634) (1,247) 5,149 (1,249) 340 (148) (233) 112 — 18,808 735 (610) (16) 1,254 (5,149) 16,300 (56) 132 (401) N/M N/M N/M (16.5)% (89.2)% N/M (1,359) 5,149 (20,057) (395) 462 (217) N/M N/M N/M (53.7)% N/M N/M 16,625 15,417 tax expense . . . . . . . . . . . . . . . . Income tax provision . . . . . . . . . . 3,555 4,260 Net income (loss) . . . . . . . . . . . . . $ 11,157 $ (1,913) $ 13,279 $ 13,070 (1,208) 705 18,699 5,420 N/M 504.3 % N/M (19,907) (4,715) $ (15,192) (106.5)% N/M N/M Earnings (loss) per share (diluted) $ 1.85 $ (0.32) $ 2.23 $ 2.17 N/M $ (2.55) (114.3)% N/M = Not Meaningful 35 Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 For the year ended December 31, 2021, consolidated net operating revenue was $108,343,000 compared with $95,813,000 for the year ended December 31, 2020, an increase of $12,530,000 or 13.1%. The increase in revenue in 2021 was attributable to lower-than-normal revenue in 2020 due to the COVID - 19 pandemic. We had increases in gross local revenue of $12,209,000, gross interactive revenue of $2,921,000, non-spot gross revenue of $1,484,000, gross national revenue (excluding national political revenue) of $819,000, and gross barter revenue of $236,000 partially offset by a decrease in gross political revenue of $5,104,000 from 2020. The increase in gross local, gross national and gross barter revenue occurred in the majority of our markets as a result of the impact of the COVID - 19 pandemic and the disruption to our advertisers’ businesses in 2020, in contrast with the economic recovery that has begun to take place in 2021. The increase in gross interactive revenue was primarily due to an increase in our streaming and website content revenue. The increase in non-spot gross revenue was primarily due to us starting to host events again in 2021, whereas the number of events being held in 2020 due to the COVID - 19 pandemic was relatively very few. The decrease in gross political revenue was due to fewer national, state and local elections in 2021 versus 2020 in the majority of our markets. Station operating expense was $83,245,000 for the year ended December 31, 2021, compared with $81,586,000 for the year ended December 31, 2020, an increase of $1,659,000 or 2.0%. The increase in operating expenses was primarily a result of increases in sales rating survey expenses, commission expense, barter expenses, interactive services expenses, healthcare costs and promotional expenses of $1,836,000, $1,035,000, $362,000, $331,000, $210,000, and $173,000, respectively, partially offset by decreases in compensation related expenses, depreciation and amortization expenses, and bad debt expense of $1,698,000, $754,000 and $364,000, respectively, from 2020. We had operating income for the year ended December 31, 2021 of $15,051,000 compared to an operating loss of $1,249,000 for the year ended December 31, 2020, an increase of $16,300,000. The increase was a result of the increase in net operating revenue partially offset by the increase in station operating expense, described above, a non-cash impairment charge of $5,149,000 in 2020 versus no impairment charge in 2021, and a decrease in our corporate general and administrative expenses of $1,534,000 or 13.3%, offset by a decrease in other operating income of $1,254,000 due to a gain on the sale of land and a building at one of our tower sites in Bellingham, Washington for $1,400,000 in 2020. The decrease in corporate general and administrative expenses was primarily attributable to decreases in non-cash compensation related expenses, legal expenses, and contribution expenses of $886,000, $323,000, and $158,000 respectively. We generated net income of $11,157,000 ($1.85 per share on a fully diluted basis) during the year ended December 31, 2021, compared to a net loss of $1,913,000 ($ (0.32) per share on a fully diluted basis) for the year ended December 31, 2020, an increase of $13,070,000. The increase in net income is due to the increase of operating income, described above, a decrease in interest expense of $56,000 and an increase in other income of $401,000, partially offset by an increase in income taxes of $3,555,000, and a decrease in interest income of $132,000. The decrease in interest expense is due to the decrease in our debt outstanding partially offset by an increase in our interest rates. The increase in other income is primarily due to insurance proceeds for weather-related damages. The increase in our income tax expense is due to the increase in income before income taxes. 36 Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 For the year ended December 31, 2020, consolidated net operating revenue was $95,813,000 compared with $123,072,000 for the year ended December 31, 2019, a decrease of $27,259,000 or 22.1%. The decrease in revenue was primarily due to the COVID - 19 pandemic and various governmental shutdowns within the markets that we operate and the country as a whole. We had decreases in gross local revenue of $27,048,000, gross national revenue (excluding national political revenue) of $4,197,000, non-spot gross revenue of $1,991,000, and gross barter revenue of $1,670,000 partially offset by an increase in gross political revenue of $5,996,000 and a decrease in agency commissions of $2,204,000 from 2019. The decrease in gross local, national and barter revenue was at the majority of our markets. The decrease in non-spot gross revenue was primarily due to the decreases in the number of events being held due to the COVID - 19 pandemic. The increase in gross political revenue was due to more national, state and local elections in 2020 versus 2019, specifically in our Charleston, South Carolina; Des Moines, Iowa; Milwaukee, Wisconsin and Portland, Maine markets. The decrease in agency commissions was due the decrease in gross revenue. Station operating expense was $81,586,000 for the year ended December 31, 2020, compared with $92,692,000 for the year ended December 31, 2019, a decrease of $11,106,000 or 12.0%. The decrease in operating expenses was primarily a result of decreases in commission expense, sales ratings survey expenses, compensation related expenses, barter expenses, music licensing fees, advertising and promotional expenses, payroll tax related expenses, travel expenses and overall expense reduction of $2,727,000, $2,640,000, $2,283,000, $1,603,000, $575,000, $562,000, $463,000, $257,000 and $987,000, respectively, partially offset by an increase in healthcare costs of $991,000 from 2019. We had an operating loss for the year ended December 31, 2020 of $1,249,000 compared to operating income of $18,808,000 for the year ended December 31, 2019, a decrease of $20,057,000. The decrease was a result of the decrease in net operating revenue partially offset by the decrease in station operating expense, described above, and a non-cash impairment charge of $5,149,000, and an increase in our corporate general and administrative expenses of $114,000 or 1.0%, offset by an increase in other operating income of $1,359,000 due to a gain on the sale of land and a building at one of our tower sites in Bellingham, Washington for $1,400,000. The increase in corporate general and administrative expenses was primarily attributable to increases in legal expenses, contribution expenses, non-cash compensation related expenses, and insurance expenses of $364,000, $151,000, $91,000, $72,000, respectively, partially offset by decreases in franchise tax expenses and travel-related expenses of $321,000 and $199,000, respectively. We generated a net loss of $1,913,000 ($(0.32) per share on a fully diluted basis) during the year ended December 31, 2020, compared to net income of $13,279,000 ($2.23 per share on a fully diluted basis) for the year ended December 31, 2019, a decrease of $15,192,000. The decrease in net income is due to the decrease of operating income, described above, a decrease in interest income of $462,000, partially offset by a decrease in income taxes of $4,715,000, a decrease in interest expense of $395,000 and an increase in other income of $217,000 due to insurance proceeds for weather-related damages. The decrease in interest expense is due to the decrease in our debt outstanding partially offset by an increase in our interest rates. The decrease in our income tax expense is due to the decrease in income before income taxes. 37 Liquidity and Capital Resources Debt Arrangements and Debt Service Requirements On August 18, 2015, we entered into a credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P. Morgan Securities LLC (collectively, the “Lenders”). The Credit Facility consisted of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and originally matured on August 18, 2020. On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility, (the “Second Amendment”), which had first been amended on September 1, 2017, extending the revolving credit maturity date under the Credit Agreement for five years after the date of the amendment to June 27, 2023. On July 1, 2019, we elected to reduce our Revolving Credit Facility to $70 million. On May 11, 2020, as part of our reincorporation as a Florida corporation, we entered into an assumption agreement and amendment of loan documents. The amendment also included an alternative benchmark rate as a replacement to LIBOR. On November 1, 2021, we elected to further reduce our Revolving Credit Facility to $50 million. We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility. Approximately $266,000 of debt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. These debt issuance costs are included in other assets, net in the consolidated balance sheets. As a result of the Second Amendment, the Company incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized. The cumulative transaction fees are being amortized over the remaining life of the Credit Facility. Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR (0.101% at December 31, 2021), plus 1% to 2% or the base rate plus 0% to 1%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. As previously noted, the May 11, 2020 amendment to the Credit Facility includes an alternative to LIBOR in the event LIBOR is no longer available. Letters of credit issued under the Credit Facility will be subject to a participation fee (which is equal to the interest rate applicable to Eurocurrency Loans, as defined in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25% per annum payable to the issuing bank. We also pay quarterly commitment fees of 0.2% to 0.3% per annum on the unused portion of the Revolving Credit Facility. The Credit Facility contains a number of financial covenants (all of which we were in compliance with at December 31, 2021) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances. On October 27, 2021, we used $10 million from funds generated by operations to voluntarily pay down the remaining amount on our Revolving Credit Facility. On June 7, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility. On February 4, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility, which was presented in the current portion of long-term debt in our balance sheet at December 31, 2018. After we paid down our debt and reduced our Revolving Credit Facility as noted above, we had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at December 31, 2021. 38 Sources and Uses of Cash During the years ended December 31, 2021, 2020 and 2019, we had net cash flows from operating activities of $19,104,000, $12,088,000 and $25,335,000, respectively. We believe that cash flow from operations will be sufficient to meet any quarterly debt service requirements for interest and scheduled payments of principal under the Credit Facility if we borrow in the future. However, if such cash flow is not sufficient, we may be required to sell additional equity securities, refinance our obligations or dispose of one or more of our properties in order to make such scheduled payments. There can be no assurance that we would be able to effect any such transactions on favorable terms, if at all. In March 2013, our board of directors authorized an increase to our Stock Buy-Back Program (the “Buy-Back Program”) to allow us to purchase up to $75.8 million of our Class A Common Stock. From its inception in 1998 through December 31, 2021, we have repurchased 2.2 million shares of our Class A Common Stock for $57 million. During the year ended December 31, 2021, approximately 16,600 shares were retained for payment of withholding taxes for $435,000 related to the vesting of restricted stock. Given the unprecedented uncertainty surrounding the COVID - 19 virus and the resulting economic issues we have halted the directions for any additional buybacks under our plan. Our capital expenditures, exclusive of acquisitions, for the year ended December 31, 2021 were $3,969,000 ($2,314,000 in 2020). We anticipate capital expenditures in 2022 to be approximately $5.5 million to $6.0 million, which we expect to finance through funds generated from operations. On January 8, 2021, we closed on an agreement to purchase WBQL and W288DQ from Consolidated Media, LLC, for an aggregate purchase price of $175,000, of which $25,000 was paid in 2020 and the remaining $150,000 paid in 2021. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Clarksville, Tennessee market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations. On January 2, 2020, we closed on an agreement to purchase W295BL from Basic Holdings, LLC, for an aggregate purchase price of $200,000, of which $10,000 was paid in 2019 and the remaining $190,000 paid in 2020. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Manchester, New Hampshire market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations. On March 31, 2020, we sold land and a building in our Bellingham, Washington market for approximately $1,700,000 to Talbot Real Estate, LLC resulting in a $1,400,000 gain on the sale of assets. The gain is recorded in the other operating (income) expense, net in the Company’s Consolidated Statements of Income. On January 9, 2019, we closed on an agreement to purchase WPVQ-AM and W222CH from County Broadcasting Company, LLC for an aggregate purchase price of $210,000 using funds generated from operations. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Greenfield, Massachusetts market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations. On December 14, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share and special cash dividend of $0.50 per share on its Classes A and B Common Stock. This dividend, totaling approximately $3,988,000, was paid on January 14, 2022 to shareholders of record on December 27, 2021 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at December 31, 2021. On September 28, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $960,000, was paid on October 22, 2021 to shareholders of record on October 8, 2021. 39 On June 18, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $960,000, was paid on July 16, 2021 to shareholders of record on June 30, 2021 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at June 30, 2021. The Company had previously temporarily suspended the quarterly cash dividend in response to the uncertainty of the ongoing impact of COVID - 19 as of June 18, 2020. On March 4, 2020, our Board of Directors declared a regular cash dividend of $0.32 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.9 million, was paid on April 10, 2020 to shareholders of record on March 16, 2020 and funded by cash on the Company’s balance sheet. On December 11, 2019, our Board of Directors declared a quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend totaling approximately $1.8 million was paid on January 17, 2020 to shareholders of record on December 27, 2019 and funded by cash on the Company’s balance sheet. On September 12, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on October 11, 2019 to shareholders of record on September 23, 2019 and funded by cash on the Company’s balance sheet. On May 30, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on July 5, 2019 to shareholders of record on June 14, 2019 and funded by cash on the Company’s balance sheet. On February 26, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on March 29, 2019 to shareholders of record on March 12, 2019 and funded by cash on the Company’s balance sheet. On October 27, 2021, we used $10 million from funds generated by operations to voluntarily pay down the remaining amount on our Revolving Credit Facility. On June 7, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of its Revolving Credit Facility. On February 4, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of its Revolving Credit Facility. We continue to actively seek and explore opportunities for expansion through the acquisitions of additional broadcast properties. We anticipate that any future acquisitions of radio stations and dividend payments will be financed through funds generated from operations, borrowings under the Credit Agreement, additional debt or equity financing, or a combination thereof. However, there can be no assurances that any such financing will be available on acceptable terms, if at all. 40 Summary Disclosures About Contractual Obligations We have future cash obligations under various types of contracts, including the terms of our Credit Facility, operating leases, programming contracts, employment agreements, and other operating contracts. The following table reflects a summary of our contractual cash obligations and other commercial commitments as of December 31, 2021: Payments Due By Period Less Than 1 Year More Than Contractual Obligations: Total 1 to 3 Years 4 to 5 Years 5 Years Interest Payments on Long-Term Debt(1) . . . . . . . $ Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase Obligations(2) . . . . . . . . . . . . . . . . . . . . . 7,414 22,622 171 $ (In thousands) 56 $ 115 $ 1,778 11,638 2,850 9,628 — $ 1,543 1,356 — 1,243 — Total Contractual Cash Obligations . . . . . . . . . . . . $ 30,207 $ 13,531 $ 12,534 $ 2,899 $ 1,243 (1) Interest payments on our Credit Facility are based on unused commitment of the credit facility and scheduled debt maturities, if we were to borrow in the future and the interest rates are held constant over the remaining terms. (2) Includes $12,818,000 in obligations under employment agreements and contracts with on-air personalities, other employees, and our President, CEO, and Chairman, Edward K. Christian. We anticipate that the above contractual cash obligations will be financed through funds generated from operations or additional borrowings under our Credit Facility, or a combination thereof. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates, judgments and assumptions that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures and contingencies. We evaluate estimates used in preparation of our financial statements on a continual basis, including estimates related to the following: Revenue Recognition: Revenue from the sale of commercial broadcast time to advertisers is recognized when commercials are broadcast. Revenue is reported net of advertising agency commissions. Agency commissions, when applicable, are based on a stated percentage applied to gross billing. All revenue is recognized in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Topic 13, Revenue Recognition Revised and Updated and the Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. 41 Carrying Value of Accounts Receivable and Related Allowance for Doubtful Accounts: We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us (e.g., bankruptcy filings, credit history, COVID - 19 potential impact on our customers’ business, etc.), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past loss history and the length of time the receivables are past due, ranging from 50% for amounts 90 days outstanding to 100% for amounts over 120 days outstanding. If our evaluations of the collectability of our accounts receivable differ from actual results, additional bad debt expense and allowances may be required. Our historical estimates have been a reliable method to estimate future allowances and our reserves have averaged approximately 2 - 5% of our outstanding receivables. The effect of an increase in our allowance of 1% of our outstanding receivables as of December 31, 2021, from 3.2% to 4.2% or from $469,000 to $614,000, would result in a decrease in net income of $105,000, net of taxes for the year ended December 31, 2021. In the event we recover amounts previously written off, we will reduce the specific allowance for credit loss. Purchase Accounting: We account for our acquisitions under the purchase method of accounting. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values as of the acquisition date. The excess of consideration paid over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair values of the net assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Broadcast Licenses and Goodwill: As of December 31, 2021, we have recorded approximately $90,277,000 in broadcast licenses and $19,209,000 in goodwill, which represents 44% of our total assets. In assessing the recoverability of these assets, we must conduct impairment testing and charge to operations an impairment expense only in the periods in which the carrying value of these assets is more than their fair value. We conduct the impairment testing of broadcast licenses and goodwill annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. There was no impairment of broadcast licenses in 2021. During 2020, we recognized a $5,149,000 impairment charge ($1,392,000 in the third quarter of 2020 and $3,757,000 in the second quarter of 2020) for broadcast license due to a decrease in projected revenue in the markets listed below due to the impact of the COVID - 19 pandemic, an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market. We were starting to see increased revenue from our low point in the second quarter of 2020, however, they were not at the previously expected recovery rate. Our third quarter 2020 impairment charge related to our Bellingham, Washington; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Mitchell, North Dakota; Spencer, Iowa and Springfield, Illinois markets. Our second quarter 2020 impairment charge related to our Bucyrus, Ohio; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Hilton Head, South Carolina; Mitchell, South Dakota; and Ocala, Florida markets. We also reviewed our value of goodwill and other long-lived assets as of June 30, 2020 and September 30, 2020, noting no impairment in goodwill or other long-lived assets. Please refer to Note 3 — Broadcast Licenses, Goodwill and Other Intangible Assets, in the accompanying notes to the consolidated financial statements for a discussion of several key assumptions used in the fair value estimate of our broadcast licenses during 2020 impairment tests. There was no impairment of broadcast licenses in 2019. 42 We believe our estimate of the value of our broadcast licenses is a critical accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses assumptions that incorporate variables based on past experiences and judgments about future operating performance of our stations. These variables include but are not limited to: (1) the forecast growth rate of each radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. Changes in our estimates of the fair value of these assets could result in material future period write-downs in the carrying value of our broadcast licenses. For illustrative purposes only, during our 2021 impairment test had the fair values of each of our broadcasting licenses been lower by 10%, we would have recorded an additional broadcast license impairment of approximately $284,000; had the fair values of each of our broadcasting licenses been lower by 20%, we would have recorded an additional broadcast license impairment of approximately $4.9 million; and had the fair value of our broadcasting licenses been lower by 30%, we would have recorded an additional broadcast license impairment of approximately $12.6 million. Stock Based Compensation: We use a Black-Scholes valuation model to estimate the fair value of stock option awards. Under the fair value method, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Determining the fair value of share-based awards at grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors. If actual results differ significantly from these assumptions, then stock-based compensation expense may differ materially in the future from that previously recorded. The fair value of restricted stock awards is determined based on the closing market price of the Company’s Class A Common Stock on the grant date and is adjusted at each reporting date based on the amount of shares ultimately expected to vest. We had no stock options outstanding at December 31, 2021 or 2020. Litigation and Contingencies: On an ongoing basis, we evaluate our exposure related to litigation and contingencies and record a liability when available information indicates that a liability is probable and estimable. We also disclose significant matters that are reasonably possible to result in a loss or are probable but not estimable. Market Risk and Risk Management Policies Our earnings are affected by changes in short-term interest rates as a result of our long-term debt arrangements. If market interest rates averaged 1% more in 2021 than they did during 2021, our interest expense would increase, and income before taxes would decrease by $82,000. These amounts are determined by considering the impact of the hypothetical interest rates on our borrowing cost. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our financial structure. Inflation The impact of inflation on our operations has not been significant to date. We are however, starting to see the effects of higher inflation starting to impact costs of most goods and services. There can be no assurance that a high rate of inflation in the future would not have an adverse effect on our operations. Recent Accounting Pronouncements Recent accounting pronouncements are described in Note 1 to the accompanying financial statements. 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Information appearing under the caption “Market Risk and Risk Management Policies” in Item 7 is hereby incorporated by reference. Item 8. Financial Statements and Supplementary Data The financial statements attached hereto are filed as part of this annual report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a - 15 of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures over financial reporting were effective to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act will be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Changes in Internal Control Over Financial Reporting There were no changes in our internal controls over financial reporting during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a - 15(f). Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework as set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021. Our internal control over financial reporting as of December 31, 2021 has been audited by UHY LLP, an independent registered public accounting firm, as stated in its report which appears below. 44 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors Saga Communications, Inc. Opinion on Internal Control over Financial Reporting We have audited Saga Communications, Inc.’s (the Company’s) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Saga Communications, Inc. as of December 31, 2021 and 2020, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021 and the related notes and financial statement schedule, and our report dated March 16, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ UHY LLP Sterling Heights, Michigan March 16, 2022 45 Item 9B. Other Information None. Item 10. Directors, Executive Officers and Corporate Governance PART III The information required by this item is incorporated by reference to the information contained in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the Company’s fiscal year. See also Item 1. Business — Executive Officers. Item 11. Executive Compensation The information required by this item is incorporated by reference to the information contained in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the Company’s fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference to the information contained in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the Company’s fiscal year. In addition, the information contained in the “Securities Authorized for Issuance Under Equity Compensation Plan Information” subheading under Item 5 of this report is incorporated by reference herein. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the information contained in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the Company’s fiscal year. Item 14. Principal Accountant Fees and Services The information required by this item is incorporated by reference to the information contained in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the Company’s fiscal year. 46 Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements PART IV The following consolidated financial statements attached hereto are filed as part of this annual report: Report of Independent Registered Public Accounting Firm (PCAOB ID 1195) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Consolidated Financial Statements: — Consolidated Balance Sheets as of December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 — Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019 . . . . . . . . . . . . . . . . . 51 — Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019 . . . . . 52 — Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 . . . . . . . . . . . . . 53 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 2. Financial Statement Schedules Schedule II Valuation and Qualifying Accounts is disclosed in Note 1 to the Consolidated Financial Statements attached hereto and filed as part of this annual report. All other schedules for which provision are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. 3. Exhibits The Exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index, which is incorporated herein by reference. 47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Saga Communications, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement Schedule II, Valuation and Qualifying Accounts, listed in the index at item 15(a)(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of at December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the three years in the period December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 16, 2022 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to an account or disclosure that is material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 48 Critical Audit Matter – Broadcast License Impairment Analysis As disclosed in Notes 1 and 3 to the financial statements, the Company evaluates Federal Communications Commission licenses (or “broadcast licenses”) for impairment on an annual basis as of October 1st or, more frequently, if events or changes in circumstances indicate that the carrying value of the Company’s broadcast licenses may not be recoverable. The broadcast license balance as of December 31, 2021 was $90.2 million. The Company considers potential impairment by comparing the fair value of a market’s broadcast license to its carrying value. Fair value is estimated by management using the Greenfield method at the market level, which is a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. Management’s cash flow projections include significant judgments and assumptions related to market growth rates and market profit margin, estimated available market revenue including market share, terminal values and discount rates. We identified broadcast license impairment as a critical audit matter because of the significant judgments made by management to estimate the fair value of the Company’s broadcast licenses. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of inputs into the discounted cash flow model driven by management’s estimates. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures performed to evaluate the reasonableness of management’s estimates and assumptions included assessing the methodologies used by the Company and testing the significant assumptions used in the quantitative models. We tested the effectiveness of the control over management’s evaluation and determination of estimates and assumptions used as the inputs in the impairment models. We compared the cash flow models prepared by management to historical revenues and profit margins as well as third-party market data to evaluate the reasonableness of the assumptions. We evaluated historical trends in assessing the reasonableness of growth rate assumptions and performed sensitivity analysis of certain significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in these assumptions. We performed procedures to verify the mathematical accuracy of the calculations of broadcast license impairment used by management. We involved our valuation specialists to assist us in identifying the significant assumptions underlying the models, assessing the rationale and supporting documents related to these assumptions and determining the appropriateness and reasonableness of the methodologies employed. Furthermore, we assessed the appropriateness of the disclosures in the consolidated financial statements. /s/ UHY LLP We have served as the Company’s auditor since 2015. Sterling Heights, Michigan March 16, 2022 49 Saga Communications, Inc. Consolidated Balance Sheets (In thousands, except par value) Assets Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Accounts receivable, less allowance of $469 ($648 in 2020) . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets: Broadcast licenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles, right of use assets, deferred costs and investments, net of accumulated amortization of $15,906 ($15,524 in 2020) . . . . . . . . . . . . . . . . . . . . . . . $ Liabilities and stockholders’ equity Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Accrued expenses: Payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity: Preferred stock, 1,500 shares authorized, none issued and outstanding Common stock: Class A common stock, $.01 par value, 35,000 shares authorized, 6,835 issued December 31, 2021 2020 54,760 $ 16,269 2,449 971 74,449 144,719 91,375 53,344 51,353 15,732 2,988 895 70,968 142,680 87,795 54,885 90,277 19,209 90,208 19,106 10,653 247,932 $ 11,321 246,488 2,347 $ 2,212 6,202 3,988 5,758 901 19,196 24,802 — 7,015 51,013 — 5,660 — 5,267 795 13,934 24,607 10,000 7,405 55,946 — (6,785 in 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 68 Class B common stock, $.01 par value, 3,500 shares authorized, 965 issued and outstanding (938 in 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock (1,758 shares in 2021 and 1,751 in 2020, at cost) . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . See accompanying notes. $ 9 70,035 164,246 (37,439) 196,919 247,932 $ 9 68,900 158,990 (37,425) 190,542 246,488 50 Saga Communications, Inc. Consolidated Statements of Income Net operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,343 $ Operating expenses: Station operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (income) expenses: Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax provision (benefit): Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2021 Years Ended December 31, 2020 (In thousands, except per share data) 123,072 95,813 $ 2019 83,245 10,040 7 — 93,292 15,051 81,586 11,574 (1,247) 5,149 97,062 (1,249) 92,692 11,460 112 — 104,264 18,808 284 (16) (634) 15,417 340 (148) (233) (1,208) 4,065 195 4,260 11,157 $ 1,250 (545) 705 (1,913) $ 735 (610) (16) 18,699 4,000 1,420 5,420 13,279 Earnings (loss) per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.85 $ 1.85 $ (0.32) $ (0.32) $ 2.23 2.23 Weighted average common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average common and common equivalent shares . . . . . . . . . . . . . 5,917 5,917 5,871 5,871 5,834 5,834 Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.98 $ 0.32 $ 1.20 See accompanying notes. 51 Saga Communications, Inc. Consolidated Statements of Stockholders’ Equity Years ended December 31, 2021, 2020 and 2019 Class A Additional Common Stock Paid-In Shares Amount Shares Amount Capital Class B Common Stock Retained Earnings Treasury Stock Total Stockholders’ Equity (In thousands) Balance at January 1, 2019 . . . . . . 6,732 $ Net income . . . . . . . . . . . . . . . . . . . Conversion of shares from — 67 — 923 $ — 9 $ 64,795 $ 156,689 $ (36,561) $ 184,999 13,279 — 13,279 — — Class B to Class A . . . . . . . . . . . Issuance of restricted stock . . . . . . Forfeiture of restricted stock . . . . . Dividends declared per common 13 29 (3) — 1 — (13) 44 — — — — — — — — — — — — — — 1 — share . . . . . . . . . . . . . . . . . . . . . . — — — — — (7,146) — (7,146) Compensation expense related to restricted stock awards . . . . . . . . — — — — 2,129 — — 2,129 Purchase of shares held in treasury . . . . . . . . . . . . . . . . . . . . 401(k) plan contribution . . . . . . . . Balance at December 31, 2019 . . . 6,771 $ Net loss . . . . . . . . . . . . . . . . . . . . . . Conversion of shares from — — — — — 68 — — — 954 $ — — — — (113) (1,172) 262 9 $ 66,811 $ 162,822 $ (37,358) $ 192,352 (1,913) (1,172) 375 — — (1,913) — — — Class B to Class A . . . . . . . . . . . Forfeiture of restricted stock . . . . . Dividends declared per common 16 (2) — — (16) — — — — — — — — — — — share . . . . . . . . . . . . . . . . . . . . . . — — — — — (1,919) — (1,919) Compensation expense related to restricted stock awards . . . . . . . . — — — — 2,221 — — 2,221 Purchase of shares held in treasury . . . . . . . . . . . . . . . . . . . . 401(k) plan contribution . . . . . . . . Balance at December 31, 2020 . . . 6,785 $ Net income . . . . . . . . . . . . . . . . . . . Conversion of shares from — — — — — 68 — — — 938 $ — — — — (132) (449) 250 9 $ 68,900 $ 158,990 $ (37,425) $ 190,542 11,157 (449) 382 — — 11,157 — — — Class B to Class A . . . . . . . . . . . Issuance of restricted stock . . . . . . Dividends declared per common 12 38 — — (12) 39 — — — — — — — — — — share . . . . . . . . . . . . . . . . . . . . . . — — — — — (5,901) — (5,901) Compensation expense related to restricted stock awards . . . . . . . . — — — — 1,335 — — 1,335 Purchase of shares held in treasury . . . . . . . . . . . . . . . . . . . . 401(k) plan contribution . . . . . . . . Balance at December 31, 2021 . . . 6,835 $ — — — — 68 — — 965 $ — — — (200) (435) 221 9 $ 70,035 $ 164,246 $ (37,439) $ 196,919 (435) 421 — — See accompanying notes. 52 Saga Communications, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2021 2020 (In thousands) 2019 Cash flows from operating activities: Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,157 $ (1,913) $ 13,279 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation expense related to restricted stock awards . . . . . . . . . . . . . . . . . . . . . . . (Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Gain) on insurance claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (gain) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barter (revenue) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred and other compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities: 5,749 195 — 37 1,335 7 (589) (45) (2) (215) (Increase) decrease in receivables and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in accounts payable, accrued expenses, and other liabilities . . . . . Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from investing activities: Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of broadcast properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale and disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from insurance claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from financing activities: 507 968 7,947 19,104 (3,969) (150) 142 589 40 (3,348) 6,524 (545) 5,149 40 2,221 (1,247) (233) — (133) 463 3,016 (1,254) 14,001 12,088 (2,314) (190) 1,691 233 (24) (604) 6,945 1,420 — 103 2,129 112 (16) — (190) (634) (5,780) 7,967 12,056 25,335 (5,732) (763) 270 — (10) (6,235) Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,000) Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,623) Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,172) Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,795) Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . (695) 44,729 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,760 $51,353 $ 44,034 (10,000) (1,914) (435) (12,349) 3,407 51,353 — (3,716) (449) (4,165) 7,319 44,034 See accompanying notes. 53 Saga Communications, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Nature of Business Saga Communications, Inc. is a broadcasting company whose business is devoted to acquiring, developing and operating broadcast properties. As of December 31, 2021, we owned or operated seventy-nine FM, thirty-four AM radio stations and seventy-nine metro signals, serving twenty-seven markets throughout the United States. Principles of Consolidation The consolidated financial statements include the accounts of Saga Communications, Inc. and our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The full extent to which the effects of COVID - 19 will directly or indirectly impact our business, results of operations and financial condition, including but not limited to our future estimates regarding our allowance for doubtful accounts and our valuation of goodwill and broadcast licenses will depend on future developments that are uncertain. Our accounting estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty. The accounting estimates may change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update assumptions and estimates on an ongoing basis and may use outside experts to assist in the our evaluation, as considered necessary. Actual results may differ from estimates provided and there may be changes to those estimates in the future periods. Concentration of Risk Certain cash deposits with financial institutions may at times exceed FDIC insurance limits. Our top five markets when combined represented 39%, 40% and 39% of our net operating revenue for the years ended December 31, 2021, 2020 and 2019, respectively. We sell advertising to local and national companies throughout the United States. We perform ongoing credit evaluations of our customers and generally do not require collateral. We maintain an allowance for doubtful accounts at a level which we believe is sufficient to cover potential credit losses. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and time deposits with original maturities of three months or less. We did not have any time deposits at December 31, 2021 and 2020. Financial Instruments Our financial instruments are comprised of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities. The carrying value of long-term debt approximates fair value as it carries interest rates that either fluctuate with the euro-dollar rate, prime rate or have been reset at the prevailing market rate at December 31, 2021. 54 Saga Communications, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Allowance for Doubtful Accounts A provision for doubtful accounts is recorded based on our judgment of the collectability of receivables. Amounts are written off when determined to be fully uncollectible. Delinquent accounts are based on contractual terms. The activity in the allowance for doubtful accounts during the years ended December 31, 2021, 2020 and 2019 was as follows: Year Ended Balance Charged to Allowance at Beginning Costs and of Period From Expenses Acquisitions Recoveries Write Off of Uncollectible Accounts, Net of End of Period Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 648 $ 671 $ 759 $ 56 $ 420 $ 578 $ — $ — $ — $ (235) $ (443) $ (666) $ 469 648 671 (in thousands) Barter Transactions Our radio stations trade air time for goods and services used principally for promotional, sales and other business activities. An asset and a liability are recorded at the fair market value of goods or services received. Barter revenue is recorded when commercials are broadcast, and barter expense is recorded when goods or services received are used. Property and Equipment Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed as incurred. When property and equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and the gain or loss realized on disposition is reflected in earnings. Depreciation is provided using the straight-line method based on the estimated useful life of the assets. We review our property and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If the assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. We did not record any impairment of property and equipment during 2021, 2020 and 2019. Property and equipment consisted of the following: Estimated Useful Life December 31, 2021 (In thousands) 2020 Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.5 years Towers and antennae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - 15 years Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 15 years Furniture, fixtures and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - 20 years 5 years Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 14,638 $ 14,559 38,059 25,976 53,547 7,189 3,350 142,680 (87,795) $ 53,344 $ 54,885 38,225 25,918 55,955 7,129 2,854 144,719 (91,375) Depreciation expense for continuing operations for the years ended December 31, 2021, 2020 and 2019, was $5,362,000, $5,711,000 and $5,916,000, respectively. 55 Saga Communications, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Intangible Assets Intangible assets deemed to have indefinite useful lives, which include broadcast licenses and goodwill, are not amortized and are subject to impairment tests which are conducted as of October 1 of each year, or more frequently if impairment indicators arise. We have 113 broadcast licenses serving 27 markets, which require renewal over the period of 2022 - 2030. In determining that the Company’s broadcast licenses qualified as indefinite-lived intangible assets, management considered a variety of factors including our broadcast licenses may be renewed indefinitely at little cost; our broadcast licenses are essential to our business and we intend to renew our licenses indefinitely; we have never been denied the renewal of an FCC broadcast license nor do we believe that there will be any compelling challenge to the renewal of our broadcast licenses; and we do not believe that the technology used in broadcasting will be replaced by another technology in the foreseeable future. Separable intangible assets that have finite lives are amortized over their useful lives using the straight-line method. Favorable lease agreements are amortized over the leases length, ranging from one to twenty-six years. Other intangibles are amortized over one to fifteen years. Customer relationships are amortized over three years. Deferred Costs The costs related to the issuance of debt are capitalized and amortized to interest expense over the life of the Credit Facility. During the years ended December 31, 2021, 2020 and 2019, we recognized interest expense related to the amortization of debt issuance costs of $37,000, $40,000 and $103,000, respectively. At December 31, 2021 and 2020 the net book value of debt issuance costs related to our line of credit was $17,000, and $64,000, respectively, and was presented in other intangibles, deferred costs and investments in our Consolidated Balance Sheets. Leases We determine whether a contract is or contains a lease at inception. The lease liabilities and right-of-use assets are recorded on the balance sheet for all leases with an expected term of at least one year, based on the present value of the lease payments using (1) the rate implicit in the lease or (2) our incremental borrowing rate (“IBR”). Our IBR is defined as the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. We follow the accounting guidance for leases, which includes the recognition of lease expense for leases on a straight-line basis over the lease term. See Note 12 – Commitments and Contingencies for more information on Leases. Treasury Stock In March 2013, our board of directors authorized an increase in the amount committed to our Stock Buy-Back Program (the “Buy-Back Program”) from $60 million to $75.8 million. The Buy-Back Program allows us to repurchase our Class A Common Stock. As of December 31, 2021, we had remaining authorization of $18.4 million for future repurchases of our Class A Common Stock. Repurchases of shares of our Common Stock are recorded as Treasury stock and result in a reduction of Stockholders’ equity. During 2021, 2020 and 2019, we acquired 16,577 shares at an average price of $26.25 per share, 24,255 shares at an average price of $18.51 per share and 39,505 shares at an average price of $29.68 per share, respectively. 56 Saga Communications, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Revenue Recognition Revenue from the sale of commercial broadcast time to advertisers is recognized when commercials are broadcast. Revenue is reported net of advertising agency commissions. Agency commissions, when applicable are based on a stated percentage applied to gross billing. All revenue is recognized in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Topic 13, Revenue Recognition Revised and Updated and The Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. Local Marketing Agreements We have entered into Time Brokerage Agreements (“TBAs”) or Local Marketing Agreements (“LMAs”) in certain markets. In a typical TBA/LMA, the FCC licensee of a station makes available, for a fee, blocks of air time on its station to another party that supplies programming to be broadcast during that air time and sells its own commercial advertising announcements during the time periods specified. Revenue and expenses related to TBAs/LMAs are included in the accompanying Consolidated Statements of Income. Assets and liabilities related to the TBAs/LMAs are included in the accompanying Consolidated Balance Sheets. Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred. Such costs amounted to $1,396,000, $985,000 and $2,442,000 for the years ended December 31, 2021, 2020 and 2019, respectively. Income Taxes The provision for income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is primarily dependent upon the generation of future taxable income. Our effective tax rate is higher than the federal statutory rate as a result of the inclusion of state taxes in the income tax amount and permanent differences primarily relating to executive compensation. Dividends On December 14, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share and special cash dividend of $0.50 per share on its Classes A and B Common Stock. This dividend, totaling approximately $3,990,000, was paid on January 14, 2022 to shareholders of record on December 27, 2021 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at December 31, 2021. On September 28, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $960,000, was paid on October 22, 2021 to shareholders of record on October 8, 2021. On June 18, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $960,000, was paid on July 16, 2021 to shareholders of record on June 30, 2021 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at June 30, 2021. The Company had previously temporarily suspended the quarterly cash dividend in response to the uncertainty of the ongoing impact of COVID - 19 as of June 18, 2020. 57 Saga Communications, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) On June 18, 2020, our Board of Directors announced that it was temporarily suspending the quarterly cash dividend in response to the continued uncertainty of the ongoing impact of COVID - 19. On March 4, 2020, our Board of Directors declared a regular quarterly cash dividend of $0.32 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.9 million, was paid on April 10, 2020 to shareholders of record on March 16, 2020 and funded by cash on the Company’s balance sheet. On December 11, 2019, our Board of Directors declared a quarterly cash dividend of $0.30 per share on its Classes A and B shares. This dividend totaling approximately $1.8 million was paid on January 17, 2020 to shareholders of record on December 27, 2019 and funded by cash on the Company’s balance sheet. On September 12, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on October 11, 2019 to shareholders of record on September 23, 2019 and funded by cash on the Company’s balance sheet. On May 30, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on July 5, 2019 to shareholders of record on June 14, 2019 and funded by cash on the Company’s balance sheet. On February 26, 2019, our Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on March 29, 2019 to shareholders of record on March 12, 2019 and funded by cash on the Company’s balance sheet. Stock-Based Compensation Stock-based compensation cost for stock option awards is estimated on the date of grant using a Black-Scholes valuation model and is expensed on a straight-line method over the vesting period of the options. Stock-based compensation expense is recognized net of estimated forfeitures. The fair value of restricted stock awards is determined based on the closing market price of our Class A Common Stock on the grant date and is adjusted at each reporting date based on the amount of shares ultimately expected to vest. See Note 7 — Stock-Based Compensation for further details regarding the expense calculated under the fair value based method. Segments We serve twenty-seven radio markets (reporting units) that aggregate into one operating segment (Radio), which also qualifies as a reportable segment. We operate under one reportable busines segment for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance. The Chief Operating Decision Maker (“CODM”) evaluates the results of the radio operating segment and makes operating and capital investment decisions based at the Company level. Furthermore, technological enhancements and system integration decisions are reached at the Company level and applied to all markets rather than to specific or individual markets to ensure that each market has the same tools and opportunities as every other market. Managers at the market level do not report to the CODM and instead report to other senior management, who are responsible for the operational oversight of radio markets and for communication of results to the CODM. We continually review our operating segment classification to align with operational changes in our business and may make changes as necessary. 58 Saga Communications, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Earnings Per Share Earnings per share is calculated using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security. We have participating securities related to restricted stock units, granted under our Second Amended and Restated 2005 Incentive Compensation Plan, that earn dividends on an equal basis with common shares. In applying the two-class method, earnings are allocated to both common shares and participating securities. The following table sets forth the computation of basic and diluted earnings per share: Years Ended December 31, 2021 2019 2020 (In thousands, except per share data) Numerator: Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Less: Income (loss) allocated to unvested participating securities . . . . Net income (loss) available to common stockholders . . . . . . . . . . . . . $ 11,157 $ 190 10,967 $ (1,913) $ (21) (1,892) $ 13,279 292 12,987 Denominator: Denominator for basic earnings per share — weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,917 5,871 5,834 Effect of dilutive securities: Common stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denominator for diluted earnings per share — adjusted weighted- — — — average shares and assumed conversions . . . . . . . . . . . . . . . . . . . . . . 5,917 5,871 5,834 Earnings (loss) per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.85 $ 1.85 $ (0.32) $ (0.32) $ 2.23 2.23 There were no stock options outstanding that had an antidilutive effect on our earnings per share calculation for the years ended December 31, 2021, 2020, and 2019, respectively. The actual effect of these shares, if any, on the diluted earnings per share calculation will vary significantly depending on fluctuations in the stock price. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019 - 12, “Income Taxes (Topic 740): Simplifying the Accounting for Incomes Taxes” (“ASU 2019 - 12”) which is intended to simplify various aspects related to accounting for income taxes. ASU 2019 - 12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance regarding the tax treatment of certain franchise taxes, goodwill and nontaxable entities, among other items to improve consistent application. ASU 2019 - 12 is effective for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this standard on January 1, 2021 and there was no material impact as a result of adoption. 59 Saga Communications, Inc. Notes to Consolidated Financial Statements 2. Revenue Nature of goods and services The following is a description of principal activities from which we generate our revenue: Broadcast Advertising Revenue Our primary source of revenue is from the sale of advertising for broadcast on our stations. We recognize revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising; therefore, revenue is recognized at a point in time when each advertising spot is transmitted. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory placed by agency and are reported as a reduction of advertising revenue. Digital Advertising Revenue We recognize revenue from our digital initiatives across multiple platforms such as targeted digital advertising, online promotions, advertising on our websites and digital audio streams, mobile messaging, email marketing and other e-commerce. Revenue is recorded when each specific performance obligation in the digital advertising campaign takes place, typically within a one month period. Other Revenue Other revenue includes revenue from concerts, promotional events, tower rent and other miscellaneous items. Revenue is generally recognized when the event is completed, as the promotional events are completed or as each performance obligation is satisfied. Disaggregation of Revenue The following table presents revenues disaggregated by revenue source: Twelve Months Ended December 31, 2020 (in thousands) 2019 2021 Types of Revenue Broadcast Advertising Revenue, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,573 $ 87,481 $ 112,278 3,783 Digital Advertising Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,011 Net Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,343 $ 95,813 $ 123,072 6,337 6,433 3,416 4,916 60 Saga Communications, Inc. Notes to Consolidated Financial Statements 2. Revenue (continued) Contract Liabilities Payments from our advertisers are generally due within 30 days although certain advertisers are required to pay in advance. When an advertiser pays for the services in advance of the performance obligations these prepayments are contract liabilities. Typical contract liabilities relate to prepayments for advertising spots not yet run; prepayments from sponsors for events that have not yet been held; and gift cards sold on our websites used to finance a broadcast advertising campaign. Generally all contract liabilities are expected to be recognized within one year and are included in accounts payable in the Company’s Consolidated Financial Statements and are immaterial. Transaction Price Allocated to the Remaining Performance Obligations As the majority of our contracts are one year or less, we have utilized the optional exemption under ASC 606 - 10 - 50 - 14 and will not disclose information about the remaining performance obligations for contracts which have original expected durations of one year or less. 3. Broadcast Licenses, Goodwill and Other Intangible Assets We evaluate our FCC licenses for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We operate our broadcast licenses in each market as a single asset and determine the fair value by relying on a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are broadcast licenses. The fair value calculation contains assumptions incorporating variables that are based on past experiences and judgments about future operating performance using industry normalized information for an average station within a market. These variables include, but are not limited to: (1) the forecasted growth rate of each radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) the estimated available advertising revenue within the market and the related market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. If the carrying amount of FCC licenses is greater than their estimated fair value in a given market, the carrying amount of FCC licenses in that market is reduced to its estimated fair value. We also evaluate goodwill for impairment annually, or more frequently if certain circumstances are present. If the carrying amount of goodwill in a reporting unit is greater than the implied value of goodwill determined by completing a hypothetical purchase price allocation using estimated fair value of the reporting unit, the carrying amount of goodwill in that reporting unit is reduced to its implied value. 61 Saga Communications, Inc. Notes to Consolidated Financial Statements 3. Broadcast Licenses, Goodwill and Other Intangible Assets (continued) We evaluate amortizable intangible assets for recoverability when circumstances indicate impairment may have occurred, using an undiscounted cash flow methodology. If the future undiscounted cash flows for the intangible asset are less than net book value, then the net book value is reduced to the estimated fair value. Amortizable intangible assets are included in other intangibles, deferred costs and investments in the consolidated balance sheets. Broadcast Licenses We have recorded the changes to broadcast licenses for the years ended December 31, 2021 and 2020 as follows: Total (in thousands) Balance at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ 95,311 46 (5,149) 90,208 69 90,277 2021 Impairment Test We completed our impairment annual impairment test of broadcast licenses during the fourth quarter of 2021 and determined that the fair value of the broadcast licenses was greater than the carrying value recorded for each of our markets and, accordingly, no impairment was recorded. The following table reflects certain key estimates and assumptions used in the impairment tests during the fourth quarter ended 2021, the year ended 2020 and in the fourth quarter of 2019. The ranges for operating profit margin and market long-term revenue growth rates vary by market. In general, when comparing between 2021, 2020 and 2019: (1) the market specific operating profit margin range remained relatively consistent with some decreases to our smaller markets due to the cost of operations in a small market; (2) the market long-term revenue growth rates were relatively consistent; (3) the discount rate increased a small percentage due to the COVID - 19 pandemic; and (4) current year revenue projections were flat with amounts previously projected for 2021. Fourth Quarter 2021 Year Ended 2020 Fourth Quarter 2019 Discount rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3% - 12.6 % 12.6% - 13.0 % 12.2% - 12.2 % Operating profit margin ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.8% - 36.4 % 17.8% - 36.4 % 19.0% - 36.4 % 0.2% - 2.6 % 0.2% - 2.9 % 0.0% - 2.9 % Market long-term revenue growth rates . . . . . . . . . . . . . . . . . . . . . . . If actual market conditions are less favorable than those estimated by us or if events occur or circumstances change that would reduce the fair value of our broadcast licenses below the carrying value, we may be required to recognize additional impairment charges in future periods. Such a charge could have a material effect on our consolidated financial statements. We will continue to monitor potential triggering events and perform the appropriate analysis when deemed necessary. 62 Saga Communications, Inc. Notes to Consolidated Financial Statements 3. Broadcast Licenses, Goodwill and Other Intangible Assets (continued) 2020 Impairment Test Due to the impact of the COVID - 19 pandemic on the U.S. economy and the related significant negative impact on our revenue for the second, third and fourth quarter of 2020 (excluding political advertising) in the majority of our markets, the Company tested its FCC License for impairment during the second quarter and again in the third quarter of 2020. Our broadcast revenue was significantly negatively impacted in the majority of the states where we operate, due to economic shutdowns and the related decline in advertising spending nationwide as most companies were making massive payroll cuts out of a necessity to survive with their revenues also significantly impacted. We experienced a significant number of cancellations of advertising on our stations, with the greatest decreases in the following industries/categories: Automotive, Entertainment, Home Improvement, Professional Services, Restaurants, and Retail. The only category where we saw an increase over the prior quarters and year to date in 2020 were political advertising and government/public service/issue advertising. We also saw significant declines in our revenue related to events, venues, travel and sports as these types of businesses have been virtually shut down. We started to see increased revenues from our low point in Q2 2020, however, throughout 2020 they were not at the previously expected recovery rate. Based on the trends we were seeing at our markets we believe that our analysis and estimates used during the third quarter 2020 analysis remained our best estimate and we did not believe any further triggering events occurred during the fourth quarter of 2020 since the date of the previous analysis that would require any additional impairment testing for broadcast licenses. As a result of the quantitative impairment test performed as of June 30, 2020, the Company determined that the fair value of the broadcast licenses were less than the carrying amount on the balance sheet and recorded non-cash impairment charges totaling $3.8 million related to the FCC licenses in our Bucyrus, Ohio; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Hilton Head, South Carolina; Mitchell, South Dakota; and Ocala, Florida markets. The impairment charges were primarily due to a decrease in projected revenue in these markets due to the impact of the COVID - 19 pandemic, an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market. As a result of the quantitative impairment test performed as of September 30, 2020, the Company determined that the fair value of the broadcast licenses were less than the carrying amount on the balance sheet and recorded non-cash impairment charges totaling $1.4 million for the quarter ended September 30, 2020 related to the FCC licenses in our Bellingham, Washington; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Mitchell, South Dakota; Spencer, Iowa and Springfield, Illinois. The impairment charges were primarily due to a decrease in projected revenue in these markets due to the impact of the COVID - 19 pandemic, an increase in the discount rate used in 2019 but slightly less than in the second quarter of 2020, in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market. 2019 Impairment Test During the fourth quarter of 2019, we completed our annual impairment test of broadcast and determined that the fair value of the broadcast licenses was greater than the carrying value recorded for each of our markets and, accordingly, no impairment was recorded. 63 Saga Communications, Inc. Notes to Consolidated Financial Statements 3. Broadcast Licenses, Goodwill and Other Intangible Assets (continued) Goodwill During the fourth quarter of 2021, the Company performed its annual impairment test of goodwill in accordance with ASC 350 and determined that the fair value was in excess of its carrying value and, accordingly, no impairment was recorded. We have recorded the changes to goodwill for each of the years ended December 31, 2021 and 2020 as follows: Total (in thousands) Balance at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,963 143 19,106 103 19,209 Other Intangible Assets We have recorded amortizable intangible assets at December 31, 2021 as follows: Gross Carrying Accumulated Amount Amortization Amount Net (In thousands) Non-competition agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Favorable lease agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,861 $ 5,965 4,660 1,829 16,315 $ 3,861 $ 5,597 4,660 1,788 15,906 $ — 368 — 41 409 We have recorded amortizable intangible assets at December 31, 2020 as follows: Gross Carrying Accumulated Amount Amortization Amount Net Non-competition agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Favorable lease agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,861 $ 5,965 4,660 1,834 16,320 $ 3,861 $ 5,570 4,322 1,771 15,524 $ — 395 338 63 796 (In thousands) Aggregate amortization expense for these intangible assets for the years ended December 31, 2021, 2020 and 2019, was $387,000, $813,000 and $1,029,000, respectively. Our estimated annual amortization expense for the years ending December 31, 2022, 2023, 2024, 2025 and 2026 is $39,000, $35,000, $33,000, $33,000 and $32,000, respectively. 64 Saga Communications, Inc. Notes to Consolidated Financial Statements 4. Long-Term Debt On October 27, 2021, we used $10 million from funds generated by operations to voluntarily pay down the remaining amount on our Revolving Credit Facility and as such, have no debt outstanding at December 31, 2021. Long-term debt consisted of the following: December 31, December 31, 2021 2020 (In thousands) Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Amounts payable within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — — $ 10,000 — 10,000 On August 18, 2015, we entered into a new credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P. Morgan Securities LLC. The Credit Facility consisted of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and originally matured on August 18, 2020. On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility, (the “Second Amendment”), which had first been amended on September 1, 2017, extending the revolving credit maturity date under the Credit Agreement for five years after the date of the amendment to June 27, 2023. On July 1, 2019, we elected to reduce our Revolving Credit Facility to $70 million. On May 11, 2020, as part of our reincorporation as a Florida corporation, we entered into an assumption agreement and amendment of loan documents. The amendment also included an alternative benchmark rate as a replacement to LIBOR. On November 1, 2021, we elected to further reduce our Revolving Credit Facility to $50 million. We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility. Approximately $266,000 of debt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. These debt issuance costs are included in other assets, net in the consolidated balance sheets. As a result of the Second Amendment, we incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized. The cumulative transaction fees are being amortized over the remaining life of the Credit Facility. Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR (0.101% at December 31, 2021), plus 1% to 2% or the base rate plus 0% to 1%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. As previously noted, the May 11, 2020 amendment to the Credit Facility includes an alternative to LIBOR in the event LIBOR is no longer available. Letters of credit issued under the Credit Facility will be subject to a participation fee (which is equal to the interest rate applicable to Eurocurrency Loans, as defined in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25% per annum payable to the issuing bank. We also pay quarterly commitment fees of 0.2% to 0.3% per annum on the unused portion of the Revolving Credit Facility. The Credit Facility contains a number of financial covenants (all of which we were in compliance with at December 31, 2021) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances. On June 7, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility. 65 Saga Communications, Inc. Notes to Consolidated Financial Statements 4. Long-Term Debt (continued) On February 4, 2019, we used $5,000,000 from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility, which was presented in current portion of long-term debt in our balance sheet at December 31, 2018. After we paid down our debt and reduced our Revolving Credit Facility as noted above, we had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at December 31, 2021. 5. Supplemental Cash Flow Information 2021 Years Ended December 31, 2020 (In thousands) 2019 Cash paid during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253 $ 3,450 $ 311 $ 1,099 $ 635 3,893 Non-cash transactions: Barter revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Barter expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Use of treasury shares for 401(k) match . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,125 $ 2,124 $ — $ 221 $ 2,014 $ 1,881 $ 6 $ 250 $ 3,560 3,370 28 262 6. Income Taxes On March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) were each enacted in response to the COVID - 19 pandemic. The FFCR Act and the CARES Act contain numerous tax provisions, such as deferring payroll payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and updating the definition of qualified improvement property. This legislation currently has no material impact to the Company’s financial statements. 66 Saga Communications, Inc. Notes to Consolidated Financial Statements 6. Income Taxes (continued) An income tax expense of $4,260,000 was recorded for the year ended December 31, 2021 compared to income tax expense of $705,000 for the year ended December 31, 2020. The effective tax rate was approximately 27.6% for the year ended December 31, 2021 compared to (58.4)% for the year ended December 31, 2020. The 2020 year to date tax rate was impacted by permanent differences primarily relating to executive compensation resulting in additional tax expense of approximately $1.0 million offset by the broadcast license impairment charge which was a discrete item and contributed approximately $1.4 million of tax benefit for the year ended December 31, 2020. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows: Deferred tax liabilities: Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Current portion of deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Non-current portion of deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ December 31, 2021 2020 (In thousands) 4,242 $ 21,425 405 26,072 4,802 20,442 426 25,670 43 1,093 134 1,270 — 1,270 24,802 $ 361 $ (25,163) (24,802) $ 89 824 150 1,063 — 1,063 24,607 150 (24,757) (24,607) Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. At December 31, 2021 and December 31, 2020, we do not have a valuation allowance for net deferred tax assets. At December 31, 2021 and 2020, net deferred tax liabilities include a deferred tax asset of $1,270,000 and $1,063,000, respectively, relating to deferred compensation, stock-based compensation expense, accrued compensation, the allowance for doubtful accounts, and other accrued expenses. 67 Saga Communications, Inc. Notes to Consolidated Financial Statements 6. Income Taxes (continued) The significant components of the provision for income taxes are as follows: 2021 Years Ended December 31, 2020 (In thousands) 2019 Current: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Income Tax Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,080 $ 985 4,065 195 4,260 $ 850 $ 400 1,250 (545) 705 $ 2,900 1,100 4,000 1,420 5,420 The reconciliation of income tax at the U.S. federal statutory tax rates to income tax expense (benefit) is as follows: 2021 Years Ended December 31, 2020 (In thousands) 2019 Tax expense (benefit) at U.S. statutory rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ State tax expense, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,209 $ 815 236 4,260 $ (290) $ 235 760 705 $ 3,976 1,079 365 5,420 The 2021 and 2019 effective tax rates exceed the federal statutory rate primarily due to non-deductible compensation related expenses and state income taxes. The 2020 effective tax rate exceeded the federal statutory rate primarily due to non-deductible compensation related expenses, book tax differences in impairment charges and state income taxes. The Company files income taxes in the U.S. federal jurisdiction, and in various state and local jurisdictions. The Company is no longer subject to U.S. federal examinations by the Internal Revenue Service (IRS) for years prior to 2018. During the first quarter of 2015, the IRS commenced an examination of the Company’s 2013 U.S. federal income tax return which was completed in the first quarter of 2016 and resulted in no changes to the return. The Company is subject to examination for income and non-income tax filings in various states. As of December 31, 2021, and 2020, there were no accrued balances recorded related to uncertain tax positions. We classify income tax-related interest and penalties that are related to income tax liabilities as a component of income tax expense. For the years ended December 31, 2021, 2020 and 2019, we had $0, $600, and $2,100, respectively, tax-related interest and penalties and had $0 accrued at December 31, 2021 and 2020. 68 Saga Communications, Inc. Notes to Consolidated Financial Statements 7. Stock-Based Compensation 2005 Incentive Compensation Plan On May 13, 2019 our stockholders approved an amendment to the Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan (as amended, The Second Restated 2005 Plan). This plan was first approved in 2005, and subsequently re-approved in 2010 and 2013. The amendment to the Second Restated 2005 Plan (i) extended the date for making awards to September 6, 2023 and (ii) increased the number of authorized shares under the Plan by 90,000 shares of Class B Common Stock. The Second Restated 2005 Plan allows for the granting of restricted stock, restricted stock units, incentive stock options, nonqualified stock options, and performance awards to eligible employees and non-employee directors. The number of shares of Common Stock that may be issued under the Second Restated 2005 Plan may not exceed 370,000 shares of Class B Common Stock, 990,000 shares of Class A Common Stock of which up to 620,000 shares of Class A Common Stock may be issued pursuant to incentive stock options and 370,000 Class A Common Stock issuable upon conversion of Class B Common Stock. Awards denominated in Class A Common Stock may be granted to any employee or director under the Second Restated 2005 Plan. However, awards denominated in Class B Common Stock may only be granted to Edward K. Christian, President, Chief Executive Officer, Chairman of the Board of Directors, and the holder of 100% of the outstanding Class B Common Stock of the Company. Stock options granted under the Second Restated 2005 Plan may be for terms not exceeding ten years from the date of grant and may not be exercised at a price which is less than 100% of the fair market value of shares at the date of grant. Stock-Based Compensation Our stock-based compensation expense is measured and recognized for all stock-based awards to employees using the estimated fair value of the award. Compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award. For these awards, we have recognized compensation expense using a straight-line amortization method. Accounting guidance requires that stock-based compensation expense be based on awards that are ultimately expected to vest; therefore stock-based compensation has been adjusted for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. All stock options were fully vested and expensed at December 31, 2012, therefore there was no compensation expense related to stock options for the years ended December 31, 2021, 2020 and 2019. We calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The estimated expected volatility, expected term of options and estimated annual forfeiture rate were determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. There were no options granted during 2021, 2020 and 2019 and there were no stock options outstanding as of December 31, 2021. 69 Saga Communications, Inc. Notes to Consolidated Financial Statements 7. Stock-Based Compensation (continued) The following summarizes the restricted stock transactions for the year ended December 31: Weighted Average Grant Date Fair Value Shares Outstanding at January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-vested and outstanding at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average remaining contractual life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,176 $ 72,985 (51,021) (2,916) 128,224 $ — (62,137) (2,332) 63,755 $ 77,913 (41,059) — 100,609 $ 2.3 40.87 31.18 42.66 40.30 34.66 — 36.50 33.65 32.90 23.00 33.85 — 24.85 The weighted average grant date fair value of restricted stock that vested during 2021 and 2019 was $1,792,000 and $2,276,000, respectively. There were no restricted stock grants awarded in 2020. The net value of unrecognized compensation cost related to unvested restricted stock awards aggregated $2,354,000, $1,896,000 and $4,195,000 at December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019 we had $1,335,000, $2,221,000 and $2,129,000, respectively, of total compensation expense related to restricted stock-based arrangements. The expense is included in corporate general and administrative expenses in our results of operations. The associated tax benefit recognized for the years ended December 31, 2021, 2020 and 2019 was $121,000, $235,000 and $227,000, respectively. 8. Employee Benefit Plans 401(k) Plan We have a defined contribution pension plan (“401(k) Plan”) that covers substantially all employees. Employees can elect to have a portion of their wages withheld and contributed to the plan. The 401(k) Plan also allows us to make a discretionary contribution. Total administrative expense under the 401(k) Plan was $1,550, $2,900 and $2,400 in 2021, 2020 and 2019, respectively. The Company’s discretionary contribution to the plan was approximately $250,000, $225,000 and $250,000 for the years ended December 31, 2021, 2020 and 2019, respectively. Deferred Compensation Plan In 1999 we established a Nonqualified Deferred Compensation Plan which allows officers and certain management employees to annually elect to defer a portion of their compensation, on a pre-tax basis, until their retirement. The retirement benefit to be provided is based on the amount of compensation deferred and any earnings thereon. Deferred compensation expense for the years ended December 31, 2021, 2020 and 2019 was $100,000, $105,000 and $135,000, respectively. We invest in company-owned life insurance policies to assist in funding these programs. The cash surrender values of these policies are in a rabbi trust and are recorded as our assets. 70 Saga Communications, Inc. Notes to Consolidated Financial Statements 8. Employee Benefit Plans (continued) Split Dollar Officer Life Insurance We provide split dollar insurance benefits to certain executive officers and records an asset equal to the cumulative premiums paid on the related policies, as we will fully recover these premiums under the terms of the plan. We retain a collateral assignment of the cash surrender values and policy death benefits payable to insure recovery of these premiums. 9. Acquisitions and Dispositions We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. The consolidated statements of income include the operating results of the acquired stations from their respective dates of acquisition. All acquisitions were accounted for as purchases and, accordingly, the total purchase consideration was allocated to the acquired assets and assumed liabilities based on their estimated fair values as of the acquisition dates. The excess of the consideration paid over the estimated fair value of net assets acquired have been recorded as goodwill. The Company accounts for acquisition under the provisions of FASB ASC Topic 805, Business Combinations. Management assigned fair values to the acquired property and equipment through a combination of cost and market approaches based upon each specific asset’s replacement cost, with a provision for depreciation, and to the acquired intangibles, primarily an FCC license, based on the Greenfield valuation methodology, a discounted cash flow approach. 2021 Acquisitions On January 8, 2021, the Company closed on an agreement to purchase WBQL and W288DQ from Consolidated Media, LLC, for an aggregate purchase price of $175,000, of which $25,000 was paid in 2020 and the remaining $150,000 paid in 2021. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Clarksville, Tennessee market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations. The translators are start-up stations and therefore, have no pro forma revenue and expenses. On July 12, 2021, we entered into an agreement to acquire WIZZ-AM and a translator for $61,800 of which $5,000 was paid in 2021. We expect to close on this transaction in March 2022. 2020 Acquisitions On January 2, 2020, we closed on an agreement to purchase W295BL from Basic Holdings, LLC, for an aggregate purchase price of $200 thousand, of which $10 thousand was paid in 2019 and the remaining $190 thousand paid in 2020. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Manchester, New Hampshire market as well as synergies and growth opportunities expected through the combination with our existing stations. The translators are start-up stations and therefore, have no pro forma revenue and expenses. 2019 Acquisitions On January 9, 2019, we closed on an agreement to purchase WPVQ-AM and W222CH from County Broadcasting Company, LLC for an aggregate purchase price of $210 thousand. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Greenfield, Massachusetts market as well as synergies and growth opportunities expected through the combination with our existing stations. The proforma results for this acquisitions are not deemed material and therefore are not presented in the footnotes. 71 Saga Communications, Inc. Notes to Consolidated Financial Statements 9. Acquisitions and Dispositions (continued) Condensed Consolidated Balance Sheet of 2021 and 2020 Acquisitions: The following condensed balance sheets represent the estimated fair value assigned to the related assets and liabilities of the 2021 and 2020 acquisitions at their respective acquisition dates. Condensed Consolidated Balance Sheet of 2021 and 2020 Acquisitions Assets Acquired: Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Other assets: Broadcast licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Assumed: Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10. Related Party Transactions Principal Stockholder Employment Agreement Acquisitions in 2021 2020 (In thousands) 3 $ 11 69 103 172 175 — — 175 $ 46 143 189 200 — — 200 In June 2011, we entered into a new employment agreement with Edward K. Christian, Chairman, President and CEO, which became effective as of June 1, 2011, and replaced and superseded his prior employment agreement. We entered into amendments to the agreement on February 12, 2016 (the “First Amendment”), February 26, 2019 (the “Second Amendment”) and January 25, 2022 (the “Third Amendment”). The First Amendment extended the term of the employment agreement to March 31, 2021. The First Amendment also states that on each anniversary of the effective date of the employment agreement, the Compensation Committee shall determine in its discretion the amount of any annual increases (which shall not be less than the greater of 4% or a defined cost of living increase). Mr. Christian may defer any or all of his annual salary. The Second Amendment extends the term of the employment agreement from March 31, 2021 to March 31, 2025 and also makes certain clarifying modifications to the employment agreement.The Third Amendment extends the term of the employment agreement from March 31, 2025 to March 31, 2027 and makes certain changes to the employment agreement pursuant to Section 409A of the Internal Revenue Code. Under the agreement, Mr. Christian is eligible for discretionary and performance bonuses, stock options and/or stock grants in amounts determined by the Compensation Committee and will continue to participate in our benefit plan. We will maintain insurance policies, will furnish an automobile, will pay for an executive medical plan and will maintain an office for Mr. Christian at our principal executive offices and in Sarasota County, Florida. The First Amendment adds that we are authorized to pay for Mr. Christian’s tax preparation services on an annual basis and that this amount will be subject to income tax as additional compensation. The agreement provides certain payments to Mr. Christian in the event of his disability, death or a change in control. Upon a change in control, Mr. Christian may terminate his employment. The agreement also provides generally that, upon a change in control, we will pay Mr. Christian an amount equal to 2.99 times the average of his total annual salary and bonuses for each of the three immediately preceding periods of twelve consecutive months, plus an additional amount for tax liabilities, related to the payment. For the three years ended December 31, 2021 Mr. Christian’s average annual compensation, as defined by the employment agreement, was approximately $1,943,000. 72 Saga Communications, Inc. Notes to Consolidated Financial Statements 10. Related Party Transactions (continued) In addition, if Mr. Christian’s employment is terminated for any reason, other than for cause, we will continue to provide health insurance and medical reimbursement and maintain existing life insurance policies for a period of ten years, and the current split dollar life insurance policy shall be transferred to Mr. Christian and his wife, and we shall reimburse Mr. Christian for any tax consequences of such transfer. The agreement contains a covenant not to compete restricting Mr. Christian from competing with us in any of our markets if he voluntarily terminates his employment with us or is terminated for cause, for a three year period thereafter. The first amendment also entitles Mr. Christian to receive severance pay equal to 100% of his then base salary for 24 months payable in equal monthly installments and after the date upon which notice of termination is given, any unvested or time-vested stock options previously granted to Mr. Christian by us become immediately one hundred percent (100%) vested to the extent permitted by law. On December 6, 2019, Mr. Christian agreed to defer approximately $100,000 of his 2020 salary to be paid 100% on January 15, 2021. On December 16, 2020, Mr. Christian agreed to defer approximately $100,000 of his 2021 salary to be paid 100% on January 15, 2022. On December 16, 2021, Mr. Christian agreed to defer approximately $100,000 of his 2022 salary which will be paid 100% on January 13, 2023. Change in Control Agreements In December 2007, Samuel D. Bush, Senior Vice President and Chief Financial Officer, Marcia K. Lobaito, at the time, Senior Vice President, Corporate Secretary and Director of Business Affairs, and Catherine Bobinski, Senior Vice President/Finance, Chief Accounting Officer and Corporate Controller, entered into Change in Control Agreements. In September 2018, Christopher S. Forgy, Senior Vice President of Operations entered into a Change in Control Agreement. In July 2020, Eric Christian, Vice President of Digital Strategies entered into a Change in Control Agreement. Eric Christian is the son of Edward K. Christian, our President, CEO and Chairman. A change in control is defined to mean the occurrence of (a) any person or group becoming the beneficial owner, directly or indirectly, of more than 30% of the combined voting power of the Company’s then outstanding securities and Mr. Christian ceasing to be Chairman and CEO of the Company; (b) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which results in the voting securities of the Company outstanding immediately prior thereto continuing to represent more than 50% of the combined voting securities of the Company or such surviving entity; or (c) the approval of the stockholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of its assets. If there is a change in control, the Company shall pay a lump sum payment within 45 days of 1.5 times the average of the executive’s last three full calendar years of such executive’s base salary and any annual cash bonus paid. In the event that such payment constitutes a “parachute payment” within the meaning of Section 280G subject to an excise tax imposed by Section 4999 of the Internal Revenue Code, the Company shall pay the executive an additional amount so that the executive will receive the entire amount of the lump sum payment before deduction for federal, state and local income tax and payroll tax. In the event of a change in control (other than the approval of plan of liquidation), the Company or the surviving entity may require as a condition to receipt of payment that the executive continue in employment for a period of up to six months after consummation of the change in control. During such six months, executive will continue to earn his pre-existing salary and benefits. In such case, the executive shall be paid the lump sum payment upon completion of the continued employment. If, however, the executive fails to remain employed during this period of continued employment for any reason other than (a) termination without cause by the Company or the surviving entity, (b) death, (c) disability or (d) breach of the agreement by the Company or the surviving entity, then executive shall not be paid the lump sum payment. In addition, if the executive’s employment is terminated by the Company without cause within six months prior to the consummation of a change in control, then the executive shall be paid the lump sum payment within 45 days of such change in control. 73 Saga Communications, Inc. Notes to Consolidated Financial Statements 10. Related Party Transactions (continued) Other Related Party Transactions Saga South Communications, LLC (formerly, Saga Quad States), our fully owned subsidiary, completed the acquisition from Apex Media Corporation, a South Carolina corporation (“AMC”), and Pearce Development, LLC f/k/a Apex Real Property, LLC, a South Carolina limited liability company (“ARP” and together with AMC, “Seller”), of substantially all of Seller’s assets related to the operation of certain radio and translator stations, upon the satisfaction of certain closing conditions described in the Asset Purchase Agreement dated May 9, 2017 (the “Apex Agreement”) by and among Seller, Saga South Communications, LLC, and, solely in his role as guarantor under the Apex Agreement, G. Dean Pearce, as further described in the Form 8 - K filed by Saga on May 10, 2017. Mr. Pearce is President of AMC and ARP, and served on the Board of Directors of Saga from May 8, 2017 through May 9, 2021. The purchase price under the Apex Agreement was $23,000,000, subject to certain purchase price adjustments, payable in cash. The purchase price was determined through arm’s-length negotiations, and was approved by the Saga Board, and Finance and Audit Committee, in accordance with the requirements of Saga’s Corporate Governance Guidelines for the review of related party transactions. In connection with this agreement, we received 500 hours of service from New Pointe Systems, a subsidiary of Pearce Development and have agreed to provide 1,000, 30 second, spots of airtime to Pearce Development. As of December 31, 2020, the obligations from this agreement have been fulfilled. During 2021, 2020 and 2019, we also paid approximately $4,200, $4,100 and $4,400 rent per month, respectively to Pearce Development for our Hilton Head studio and office space beginning September 1, 2017. Effective June 19, 2019, we employed Eric Christian, son of Edward K. Christian, our President, CEO and Chairman, as our Director of Solution Architecture. The Audit Committee approved the employment of Mr. Christian and in July 2020 approved his promotion to Vice President of Digital Strategies. 11. Common Stock Dividends. Stockholders are entitled to receive such dividends as may be declared by our Board of Directors out of funds legally available for such purpose. However, no dividend may be declared or paid in cash or property on any share of any class of Common Stock unless simultaneously the same dividend is declared or paid on each share of the other class of common stock. In the case of any stock dividend, holders of Class A Common Stock are entitled to receive the same percentage dividend (payable in shares of Class A Common Stock) as the holders of Class B Common Stock receive (payable in shares of Class B Common Stock). Voting Rights. Holders of shares of Common Stock vote as a single class on all matters submitted to a vote of the stockholders, with each share of Class A Common Stock entitled to one vote and each share of Class B Common Stock entitled to ten votes, except (i) in the election for directors, (ii) with respect to any “going private” transaction between the Company and the principal stockholder, and (iii) as otherwise provided by law. In the election of directors, the holders of Class A Common Stock, voting as a separate class, are entitled to elect twenty-five percent, or two, of our directors. The holders of the Common Stock, voting as a single class with each share of Class A Common Stock entitled to one vote and each share of Class B Common Stock entitled to ten votes, are entitled to elect the remaining directors. The Board of Directors consisted of eight members at December 31, 2021. Holders of Common Stock are not entitled to cumulative voting in the election of directors. The holders of the Common Stock vote as a single class with respect to any proposed “going private” transaction with the principal stockholder or an affiliate of the principal stockholder, with each share of each class of Common Stock entitled to one vote per share. Under Florida law, the affirmative vote of the holders of a majority of the outstanding shares of any class of common stock is required to approve, among other things, a change in the designations, preferences and limitations of the shares of such class of common stock. 74 Saga Communications, Inc. Notes to Consolidated Financial Statements 11. Common Stock (continued) Liquidation Rights. Upon our liquidation, dissolution, or winding-up, the holders of Class A Common Stock are entitled to share ratably with the holders of Class B Common Stock in accordance with the number of shares held in all assets available for distribution after payment in full of creditors. In any merger, consolidation, or business combination, the consideration to be received per share by the holders of Class A Common Stock and Class B Common Stock must be identical for each class of stock, except that in any such transaction in which shares of common stock are to be distributed, such shares may differ as to voting rights to the extent that voting rights now differ among the Class A Common Stock and the Class B Common Stock. Other Provisions. Each share of Class B Common Stock is convertible, at the option of its holder, into one share of Class A Common Stock at any time. One share of Class B Common Stock converts automatically into one share of Class A Common Stock upon its sale or other transfer to a party unaffiliated with the principal stockholder or, in the event of a transfer to an affiliated party, upon the death of the transferor. 12. Commitments and Contingencies Leases We lease certain land, buildings and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of- use (“ROU”) assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets are limited to the expected lease term. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. As of December 31, 2021, we do not have any non-cancellable operating lease commitments that have not yet commenced. ROU assets are classified within other intangibles, deferred costs and investments, net on the condensed consolidated balance sheet while current lease liabilities are classified within other accrued expenses and long-term lease liabilities are classified within other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets were $6.1 million and $6.6 million at December 31, 2021 and 2020, respectively. Lease liabilities were $6.4 million and $6.9 million at December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, we recorded additional ROU assets under operating leases of $1,039,000, which is a non-cash transaction. Payments on lease liabilities during the year ended December 31, 2021 and 2020 totaled $1,777,000 and $1,737,000, respectively. Lease expense includes cost for leases with terms in excess of one year. For the years ended December 31, 2021, 2020 and 2019, our total lease expense was $1,765,000, $1,752,000 and $1,801,000, respectively. Short-term lease costs are de minimus. 75 Saga Communications, Inc. Notes to Consolidated Financial Statements 12. Commitments and Contingencies (continued) We have no financing leases and minimum annual rental commitments under non-cancellable operating leases consisted of the following at December 31, 2021 (in thousands): Years Ending December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total lease payments (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Interest (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value of lease liabilities (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 1,778 1,575 1,275 875 668 1,243 7,414 988 6,426 (a) Lease payments include options to extend lease terms that are reasonably certain of being exercised. There were no legally binding minimum lease payments for leases signed but not yet commenced at December 31, 2021. (b) Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date. (c) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.2 years and 4.2%, respectively, at December 31, 2021. Performance Fees We incur fees from performing rights organizations (“PRO”) to license our public performance of the musical works contained in each PRO’s repertory. The Radio Music Licensing Committee (“RMLC”), of which we are a represented participant, (1) entered into an Interim License Agreement with American Society of Composers, Authors and Publishers that was effective January 1, 2022 and will remain in effect until the date on which the parties reached agreement as to, or there is court determination of, new interim or final fees, terms, and conditions of a new license for the five year period commencing on January 1, 2022 and concluding on December 31, 2026; (2) is negotiating and will enter into, on behalf of the participating members, an Interim License Agreement with Broadcast Music, Inc.; (3) reached an agreement with the Society of European Stage Authors and Composers that is retroactive to January 1, 2016; and (4) in January 2022, RMLC and Global Music Rights (“GMR”) reach a conditional settlement of the GMR-RMLC antitrust and/or unfair competition litigations and we have entered into an agreement with GMR. Contingencies In 2003, in connection with our acquisition of one FM radio station, WJZK-FM serving the Columbus, Ohio market, we entered into an agreement whereby we would pay the seller up to an additional $1,000,000 if we obtain approval from the FCC for a city of license change. 76 Saga Communications, Inc. Notes to Consolidated Financial Statements 13. Fair Value Measurements As defined in ASC Topic 820, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs in which there is little or no market data available, which requires management to develop its own assumptions in pricing the asset or liability. Our assets and liabilities disclosed at fair value are summarized below ($000’s omitted): Fair Value Financial Instrument Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Level 1 Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Level 2 Fair Value December 31, December 31, 2021 Hierarchy 2020 $ $ 54,760 $ — $ 51,353 10,000 Our financial instruments are comprised of cash and cash equivalents, and long-term debt. The carrying value of cash and cash equivalents approximate fair value due to their short maturities. The fair value of cash and cash equivalents is derived from quoted market prices and are considered a level 1. Interest on the Credit Facility is at a variable rate, and as such the debt obligation outstanding approximates fair value and is considered a level 2. Non-Recurring Fair Value Measurements We have certain assets that are measured at fair value on a non-recurring basis under the circumstances and events described in Note 3 — Broadcast Licenses, Goodwill and Other Intangibles, and are adjusted to fair value only when the carrying values are more than the fair values. During the fourth quarter of 2021, we reviewed the fair value of the assets that are measured at fair value on a non- recurring basis and concluded that these assets were not impaired as the fair value of these assets equaled or exceeded their carrying values. During 2020, as a result of our interim impairment tests, we wrote down broadcast licenses with a carrying value of $51,448,000 to their fair value of $46,299,000, resulting in a non-cash impairment charge of $5,149,000, which is included in net income for the year ended December 31, 2020. The categorization of the framework used to price the assets is considered a level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. (See Note 3 for the disclosure of certain key assumptions used to develop the unobservable inputs.) During the fourth quarter of 2019, we reviewed the fair value of the assets that are measured at fair value on a non- recurring basis and concluded that these assets were not impaired as the fair value of these assets equaled or exceeded their carrying values. 77 Saga Communications, Inc. Notes to Consolidated Financial Statements 14. Quarterly Results of Operations (Unaudited) March 31, June 30, 2021 2020 2021 2020 September 30, 2020 2021 December 31, 2021 2020 (in thousands, except per share data) Net operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,301 $ 26,051 $ 28,046 $ 16,866 $ 28,845 $ 24,143 $ 29,151 $ 28,753 21,119 Station operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,651 Corporate G&A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) Other operating expense (income), net . . . . . . . . . . . . . . . . . . . . . — Impairment of broadcast licenses . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,996 Other (income) expenses: 22,199 3,015 (1,330) — 2,167 19,616 2,838 50 1,392 247 18,652 3,070 46 3,757 (8,659) 18,923 2,438 57 — 883 21,017 2,494 (80) — 4,615 21,690 2,538 (2) — 4,619 21,615 2,570 32 — 4,934 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax provision (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73 (6) (272) 1,088 330 758 $ 108 (108) (213) 2,380 700 72 (4) (31) 4,578 1,325 82 (25) — (8,716) (3,805) 73 (4) (279) 4,829 1,375 1,680 $ 3,253 $ (4,911) $ 3,454 $ 75 (8) — 180 1,130 (950) $ 3,692 $ 66 (2) (52) 4,922 1,230 75 (7) (20) 4,948 2,680 2,268 Basic earnings(loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Weighted average common shares . . . . . . . . . . . . . . . . . . . . . . . . 0.13 $ 0.28 $ 0.54 $ 5,913 5,866 5,917 (0.82) $ 5,868 0.58 $ 5,917 (0.16) $ 5,869 0.60 $ 5,922 0.38 5,880 Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . $ Weighted average common and common equivalent shares . . . . . . . 0.13 $ 0.28 $ 0.54 $ 5,913 5,866 5,917 (0.82) $ 5,868 0.58 $ 5,917 (0.16) $ 5,869 0.60 $ 5,922 0.38 5,880 15. Litigation The Company is subject to various outstanding claims which arise in the ordinary course of business and to other legal proceedings. Management anticipates that any potential liability of the Company, which may arise out of or with respect to these matters, will not materially affect the Company’s financial statements. 16. Other Income During the first quarter of 2021, there was weather-related damage to an antenna in our Des Moines, Iowa market. The Company’s insurance policy provided coverage for removal and replacement of the antenna and related equipment. As part of the initial insurance settlement during the first quarter of 2021, the Company received cash proceeds of $250,000, resulting in a gain of $250,000. We received additional cash proceeds of $290,000 in the third quarter, resulting in a gain of $290,000. The total gain of $540,000 is recorded in other (income) expense, net, in the Company’s Condensed Consolidated Statements of Income. During the first quarter of 2020, we sold land and a building on one of our tower sites in our Bellingham, Washington market for approximately $1,700,000 to Talbot Real Estate, LLC resulting in a $1,400,000 gain on the sale of assets. The gain is recorded in the other operating (income) expense, net in the Company’s Consolidated Statements of Income. During the first quarter of 2020, there was weather related damage to an antenna in our Keene, New Hampshire market. The Company’s insurance policy provided coverage for removal and replacement of the antenna and related equipment. The insurance settlement was finalized during the first quarter and we received cash proceeds of $208,000, resulting in a gain of $208,000. The gain is recorded in other (income) expense, net in the Company’s Consolidated Statements of Income. 17. Subsequent Events On March 1, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $970,000, will be paid on April 8, 2022 to shareholders of record on March 21, 2022. 78 Exhibit No. Description EXHIBIT INDEX 3(a) 3(b) 4(a) 10(a) 10(b) 10(c) 10(d) 10(e) 10(f) 10(g) 10(h) 10(i) 10(j) 10(k) 10(l) 3 3 17 1 2 5 3 7 7 6 4 4 10 9 8 10(m) 11 10(n) 10(o) 10(p) 10(q) 10(r) 10(s) 10(t) 10(u) 10(v) 10(w) 21 23 31.1 31.2 32 11 12 13 13 14 15 16 18 19 20 * * * * * Articles of Incorporation of Saga Communications Reincorporation, Inc. Bylaws, as amended April 16, 2020. Description of the Company’s Securities Summary of Executive Insured Medical Reimbursement Plan. Saga Communications, Inc. 2003 Employee Stock Option Plan. Chief Executive Officer Annual Incentive Plan. Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan Form of Stock Option Agreement under the Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan. Form of Restricted Stock Option Agreement under the Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan. Employment Agreement of Edward K. Christian dated as of June 17, 2011. Change in Control Agreement of Samuel D. Bush dated as of December 28, 2007. Change in Control Agreement of Marcia K. Lobaito dated as of December 28, 2007. Change in Control Agreement of Catherine A. Bobinski dated as of December 28, 2007. Amendment to Employment Agreement of Edward K. Christian dated as of February 12, 2016. Credit Agreement dated August 18, 2015 entered into between the Company and JPMorgan Chase Bank, N.A., The Huntington National Bank and Citizens Bank. Asset Purchase Agreement by and among Saga Broadcasting, LLC, Saga Quad States Communications, LLC, Saga Communications, Inc. and Evening Telegram Company d/b/a Morgan Murphy Media, dated May 9, 2017. Asset Purchase Agreement by and among Apex Media Corporation, Pearce Development, LLC f/k/a Apex Real Property, LLC, Saga Quad States Communications, LLC and G. Dean Pearce, dated May 9, 2017. Amendment to the Second Amendment and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan as of April 16, 2018. First Amendment to Credit Agreement dated September 1, 2017 entered into between the Company and JPMorgan Chase Bank, N.A., The Huntington National Bank and Citizens Bank. Letter of Employment for Christopher S. Forgy, Senior Vice President / Operations effective May 28, 2018. Second Amendment to Credit Agreement dated June 27, 2018 entered into between the Company and JPMorgan Chase Bank, N.A., The Huntington National Bank and Citizens Bank. Change in Control Agreement of Christopher Forgy dated as of September 28, 2018. Amendment to Employment Agreement of Edward K. Christian dated as of February 26, 2019. Assumption Agreement and Amendment of Loan Documents dated May 11, 2020 entered into between the Company and JPMorgan Chase Bank, N.A., The Huntington National Bank, and Citizens Bank. Change in Control Agreement of Eric Christian dated as of July 6, 2020. Third Amendment to Employment Agreement dated January 25, 2022 between Saga Communications, Inc, and Edward K. Christian. Subsidiaries. Consent of UHY LLP. Certification of Chief Executive Officer Pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer Pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13 - 14(b) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS * Inline XBRL Instance Document 79 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 104 * * * * * Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Calculation Linkbase Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Extension Label Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) * Filed herewith. 1 Exhibit filed with the Company’s Registration Statement on Form S - 1 (File No. 33 - 47238) filed on December 10, 1992 and incorporated by reference herein. 2 Exhibit filed with the Company’s Registration Statement on From 8 - A (File No. 333 - 107686) filed on August 5, 2003 and incorporated by reference herein. 3 Exhibit filed as Appendix A to the Company’s Consent Solicitation (Filed No: 001 - 11588) filed on September 17, 2013 and incorporated by reference herein. 4 Exhibit filed with the Company’s Form 8 - K filed on January 4, 2008 and incorporated by reference herein. 5 Exhibit filed with the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders and incorporated by reference herein. 6 Exhibit filed with the Company’s Form 10 - Q for the quarter ended June 30, 2011 and incorporated by reference herein. 7 Exhibit filed with the Company’s Form 8 - K filed on October 16, 2013 and incorporated by reference herein. 8 Exhibit filed with the Company’s Form 8 - K filed on August 18, 2015 and incorporated by reference herein. 9 Exhibit filed with the Company’s Form 8 - K/A filed on April 8, 2016 and incorporated by reference herein. 10 Exhibit filed with the Company’s Form 10 - K for the year ended December 31, 2015 and incorporated by reference herein. 11 Exhibit filed with the Company’s Form 8 - K filed on May 10, 2017 and incorporated by reference herein. 12 Exhibit filed as Appendix A to the Corporation’s Definitive Proxy Statement (File No. 001 - 11588) filed on April 16, 2018 and incorporated by reference herein. 13 Exhibit filed with the Company’s Form 10 - Q for the quarter ended June 30, 2018 and incorporated by reference herein. 14 Exhibit filed with the Company’s Form 8 - K filed on June 27, 2018 and incorporated by reference herein. 15 Exhibit filed with the Company’s Form 8 - K filed on September 28, 2018 and incorporated by reference herein. 16 Exhibit filed with the Company’s Form 8 - K filed on March 1, 2019 and incorporated by reference herein. 17 Exhibit filed with the Company’s Form 10 - K filed on March 13, 2020 and incorporated by reference herein. 18 Exhibit filed with the Company’s Form 10 - Q for the quarter ended June 30, 2020 and incorporated by reference herein. 19 Exhibit filed with the Company’s Form 10 - K for the year ended December 31, 2020 and incorporated by reference herein. 20 Exhibit filed with the Company’s Form 8 - K filed on January 27, 2022 and incorporated by reference herein. 80 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 16, 2022. SIGNATURES SAGA COMMUNICATIONS, INC. By: /s/ Edward K. Christian Edward K. Christian President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 16, 2022. Signatures /s/ Edward K. Christian Edward K. Christian /s/ Samuel D. Bush Samuel D. Bush /s/ Catherine A. Bobinski Catherine A. Bobinski /s/ Michael J. Bergner Michael J. Bergner /s/ Clarke R. Brown, Jr. Clarke R. Brown, Jr. /s/ Timothy J. Clarke Timothy J. Clarke /s/ Roy F. Coppedge III Roy F. Coppedge /s/ Warren Lada Warren Lada /s/ Marcia K. Lobaito Marcia K. Lobaito /s/ Gary G. Stevens Gary G. Stevens President, Chief Executive Officer and Chairman of the Board Senior Vice President, Chief Financial Officer and Treasurer Senior Vice President/Finance, Chief Accounting Officer and Corporate Controller Director Director Director Director Director Director Director 81 [This Page Intentionally Left Blank] Stockholder Information AUDITORS UHY LLP, Farmington Hills, MI TRANSFER AGENT Computershare, Canton, MA PUBLICATIONS The Company’s Annual Report Form 10-K and Quarterly Reports to Stockholders are available free of charge to stockholders. Inquiries are welcome by letter or telephone to Samuel D. Bush, Senior Vice President, Treasurer and CFO, at the Saga Corporate Office. Stockholders whose stock is held in street name are encouraged to write to the company to have their names placed on the financial mailing list, enabling them to receive annual and interim reports without delay. You may find more information about us at our Internet website located at www.sagacom.com. Our Annual report on Form 10-K, our Quarterly Reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports are available free of charge on our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. ANNUAL MEETING The Annual Meeting of Stockholders will be held on Monday, May 9, 2022 at 10:00 am Eastern Daylight Time, at the Company’s corporate offices at 73 Kercheval Avenue, Grosse Pointe Farms, MI. Please be advised that, we are monitoring developments regarding the coronavirus, or COVID-19, and preparing in the event any changes for our Annual Meeting are necessary or appropriate. If we decide to make any change, such as to the date or location, or to hold the meeting solely by remote communication, we will announce the change in advance and post details, including instructions on how stockholders can participate, on our website at www.sagacom.com, and file them with the SEC. This press release contains forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform act of 1995. Words such as “believes,” “expects,” “anticipates,” “guidance” and other similar expressions are intended to identify forward-looking statements. Key risks are described in the reports Saga Communications, Inc. periodically files with the U.S. Securities and Exchange Commission. Readers should note that these statements may be impacted by several factors, including economic changes in the radio and television broadcast industry in general, as well as Saga’s actual performance. Results may vary from those stated herein and Saga undertakes no obligation to update the information contained herein. CORPORATE OFFICERS Edward K. Christian President, Chief Executive Officer and Chairman of the Board Christopher S. Forgy Senior Vice President of Operations Samuel D. Bush Senior Vice President, Treasurer and Chief Financial Officer Marcia K. Lobaito Corporate Secretary Catherine A. Bobinski Senior Vice President – Finance, Chief Accounting Officer and Corporate Controller BOARD OF DIRECTORS Edward K. Christian Chairman of the Board Gary Stevens** Managing Director Gary Stevens & Co. Clarke Brown** Former President – Radio Division, Jefferson – Pilot Communications Roy F. Coppedge III** Founder & Former Managing Director, BV Investment Partners Timothy J. Clarke* Former President and Owner, Clarke Advertising & Public Relations, Inc. Michael J. Bergner* President & Founder Bergner & Company Marcia K. Lobaito Corporate Secretary Former SVP/Director of Business Affairs Saga Communications, Inc. Warren S. Lada* Former Chief Operating Officer Saga Communications, Inc. * Denotes participation in the Audit and Finance Committee ** Denotes participation the Compensation Committee 

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