2021 __________________☒ SEPTEMBERJUNE 30, 2020☐ 
INCORPORATION OR ORGANIZATION)
IDENTIFICATION NUMBER)4880 SANTA ROSACAMARILLO, CALIFORNIA 93012 (805) 987-0400(469)
Symbol(s)
on which registered hash (§Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller Reporting Company ☒ Emerging Growth Company ☐ November 4, 2020August 2, 2021 21,129,667 November 4, 2020August 2, 2021
| December 31, 2019 (Note 1) | September 30, 2020 (Unaudited) | |||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6 | $ | 19,298 | ||||
Trade accounts receivable (net of allowances of $10,947 in 2019 and $13,399 in 2020) | 30,824 | 24,223 | ||||||
Unbilled revenue | 2,749 | 2,875 | ||||||
Other receivables | 1,352 | 1,128 | ||||||
Inventories (net of reserves of $1,271 in 2019 and $1,447 in 2020) | 717 | 618 | ||||||
Prepaid expenses | 5,890 | 7,233 | ||||||
Assets held for sale | 185 | 3,334 | ||||||
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Total current assets | 41,723 | 58,709 | ||||||
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Notes receivable (net of allowance of $954 in 2019 and $477 in 2020) | 667 | 792 | ||||||
Property and equipment (net of accumulated depreciation of $173,122 in 2019 and $177,732 in 2020) | 87,673 | 80,723 | ||||||
Operating lease right-of-use assets | 54,550 | 49,002 | ||||||
Financing lease right-of-use assets | 180 | 126 | ||||||
Broadcast licenses | 337,858 | 319,773 | ||||||
Goodwill | 23,998 | 23,757 | ||||||
Other indefinite-lived intangible assets | 260 | — | ||||||
Amortizable intangible assets (net of accumulated amortization of $55,617 in 2019 and $58,195 in 2020) | 7,100 | 4,719 | ||||||
Deferred financing costs | 224 | 226 | ||||||
Other assets | 4,197 | 2,790 | ||||||
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Total assets | $ | 558,430 | $ | 540,617 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,468 | $ | 2,978 | ||||
Accrued expenses | 9,395 | 9,157 | ||||||
Accrued compensation and related expenses | 7,895 | 9,797 | ||||||
Accrued interest | 1,262 | 4,884 | ||||||
Contract liabilities | 9,493 | 14,713 | ||||||
Deferred rent income | 110 | 112 | ||||||
Income taxes payable | 531 | 561 | ||||||
Current portion of operating lease liabilities | 8,485 | 8,958 | ||||||
Current portion of financing (capital) lease liabilities | 69 | 56 | ||||||
Current portion of long-term debt | 12,426 | 16,600 | ||||||
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Total current liabilities | 53,134 | 67,816 | ||||||
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Long-term debt, less current portion | 216,468 | 213,580 | ||||||
Operating lease liabilities, less current portion | 54,050 | 49,052 | ||||||
Financing (capital) lease liabilities, less current portion | 124 | 86 | ||||||
Deferred income taxes | 38,778 | 69,732 | ||||||
Contract liabilities, long-term | 1,744 | 1,818 | ||||||
Deferred rent income, less current portion | 3,956 | 3,887 | ||||||
Other long-term liabilities | 513 | 2,767 | ||||||
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Total liabilities | 368,767 | 408,738 | ||||||
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Commitments and contingencies (Note 16) | ||||||||
Stockholders’ Equity: |
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Class A common stock, $0.01 par value; authorized 80,000,000 shares; 21,129,667 and 23,447,317 issued and outstanding at December 31, 2019 and September 30, 2020, respectively | 227 | 227 | ||||||
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2019 and September 30, 2020 | 56 | 56 | ||||||
Additional paid-in capital | 246,680 | 246,953 | ||||||
Accumulated deficit | (23,294 | ) | (81,351 | ) | ||||
Treasury stock, at cost (2,317,650 shares at December 31, 2019 and September 30, 2020) | (34,006 | ) | (34,006 | ) | ||||
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Total stockholders’ equity | 189,663 | 131,879 | ||||||
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Total liabilities and stockholders’ equity | $ | 558,430 | $ | 540,617 | ||||
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| December 31, 2020 (Note 1) | June 30, 2021 (Unaudited) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,325 | $ | 19,858 | ||||
Trade accounts receivable (net of allowances of $14,069 in 2020 and $14,498 in 2021) | 24,469 | 24,568 | ||||||
Unbilled revenue | 3,192 | 2,639 | ||||||
Other receivables (net of allowances of $124 in 2020 and $455 in 2021) | 1,122 | 1,468 | ||||||
Inventories (net of reserves of $1,499 in 2020 and $1,508 in 2021) | 495 | 719 | ||||||
Prepaid expenses | 6,847 | 7,166 | ||||||
Assets held for sale | 3,346 | — | ||||||
Total current assets | 45,796 | 56,418 | ||||||
Notes receivable (net of allowance of $461 in 2020 and $815 in 2021) | 721 | 636 | ||||||
Property and equipment (net of accumulated depreciation of $180,336 in 2020 and $184,521 in 2021) | 79,122 | 79,415 | ||||||
Operating lease right-of-use | 48,203 | 44,926 | ||||||
Financing lease right-of-use | 152 | 124 | ||||||
Broadcast licenses | 319,773 | 320,008 | ||||||
Goodwill | 23,757 | 23,785 | ||||||
Amortizable intangible assets (net of accumulated amortization of $58,897 in 2020 and $58,476 in 2021) | 4,017 | 3,226 | ||||||
Deferred financing costs | 213 | 174 | ||||||
Other assets | 2,817 | 3,232 | ||||||
Total assets | $ | 524,571 | $ | 531,944 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,006 | $ | 2,357 | ||||
Accrued expenses | 11,002 | 10,667 | ||||||
Accrued compensation and related expenses | 10,242 | 11,139 | ||||||
Accrued interest | 1,225 | 1,227 | ||||||
Contract liabilities | 11,652 | 12,401 | ||||||
Deferred rent income | 147 | 143 | ||||||
Income taxes payable | 563 | 605 | ||||||
Current portion of operating lease liabilities | 8,963 | 8,768 | ||||||
Current portion of financing lease liabilities | 60 | 59 | ||||||
Current portion of long-term debt | 5,000 | — | ||||||
Total current liabilities | 50,860 | 47,366 | ||||||
Long-term debt, less current portion | 213,764 | 225,327 | ||||||
Operating lease liabilities, less current portion | 47,740 | 44,049 | ||||||
Financing (capital) lease liabilities, less current portion | 107 | 82 | ||||||
Deferred income taxes | 68,883 | 68,480 | ||||||
Contract liabilities, long-term | 1,869 | 2,167 | ||||||
Deferred rent income, less current portion | 3,864 | 3,818 | ||||||
Other long-term liabilities | 2,205 | 2,242 | ||||||
Total liabilities | 389,292 | 393,531 | ||||||
Commitments and contingencies (Note 14) | 0 | 0 | ||||||
Stockholders’ Equity: | ||||||||
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,447,317 and 23,633,099 issued and 21,129,667 and 21,315,449 outstanding at December 31, 2020 and June 30, 2021, respectively | 227 | 229 | ||||||
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2020 and June 30, 2021, respectively | 56 | 56 | ||||||
Additional paid-in capital | 247,025 | 247,577 | ||||||
Accumulated deficit | (78,023 | ) | (75,443 | ) | ||||
Treasury stock, at cost (2,317,650 shares at December 31, 2020 and June 30, 2021) | (34,006 | ) | (34,006 | ) | ||||
Total stockholders’ equity | 135,279 | 138,413 | ||||||
Total liabilities and stockholders’ equity | $ | 524,571 | $ | 531,944 | ||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
Net broadcast revenue | $ | 47,679 | $ | 45,391 | $ | 142,854 | $ | 130,041 | ||||||||
Net digital media revenue | 9,149 | 9,808 | 29,349 | 28,355 | ||||||||||||
Net publishing revenue | 7,288 | 5,442 | 17,062 | 13,366 | ||||||||||||
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Total net revenue | 64,116 | 60,641 | 189,265 | 171,762 | ||||||||||||
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Operating expenses: | ||||||||||||||||
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $454 and $447 for the three months ended September 30, 2019 and 2020, respectively, and $1,426 and $1,313 for the nine months ended September 30, 2019 and 2020, respectively, paid to related parties) | 37,310 | 34,283 | 111,466 | 104,704 | ||||||||||||
Digital media operating expenses, exclusive of depreciation and amortization shown below | 7,282 | 7,144 | 22,988 | 23,123 | ||||||||||||
Publishing operating expenses, exclusive of depreciation and amortization shown below | 6,517 | 5,814 | 17,112 | 16,443 | ||||||||||||
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $27 and $18 for the three months ended September 30, 2019 and 2020, respectively, and $94 and $198 for the nine months ended September 30, 2019 and 2020, respectively, paid to related parties) | 4,183 | 3,849 | 12,386 | 11,909 | ||||||||||||
Depreciation | 2,744 | 2,677 | 8,529 | 8,108 | ||||||||||||
Amortization | 1,147 | 751 | 3,567 | 2,578 | ||||||||||||
Change in the estimated fair value of contingent earn-out consideration | (40 | ) | (10 | ) | (40 | ) | (12 | ) | ||||||||
Impairment of indefinite-lived long-term assets other than goodwill | 1,915 | — | 1,915 | 17,254 | ||||||||||||
Impairment of goodwill | — | — | — | 307 | ||||||||||||
Net (gain) loss on the disposition of assets | 17,545 | 1,381 | 21,212 | 1,494 | ||||||||||||
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Total operating expenses | 78,603 | 55,889 | 199,135 | 185,908 | ||||||||||||
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Operating income (loss) | (14,487 | ) | 4,752 | (9,870 | ) | (14,146 | ) | |||||||||
Other income (expense): | ||||||||||||||||
Interest income | — | 1 | 1 | 1 | ||||||||||||
Interest expense | (4,410 | ) | (4,024 | ) | (13,206 | ) | (12,069 | ) | ||||||||
Gain on early retirement of long-term debt | — | — | 426 | 49 | ||||||||||||
Net miscellaneous income and (expenses) | — | 1 | 19 | (45 | ) | |||||||||||
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Net income (loss) before income taxes | (18,897 | ) | 730 | (22,630 | ) | (26,210 | ) | |||||||||
Provision for income taxes | 1,108 | 401 | 697 | 31,180 | ||||||||||||
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Net income (loss) | $ | (20,005 | ) | $ | 329 | $ | (23,327 | ) | $ | (57,390 | ) | |||||
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Basic loss per share data: | ||||||||||||||||
Basic loss per share | $ | (0.75 | ) | $ | 0.01 | $ | (0.88 | ) | $ | (2.15 | ) | |||||
Diluted loss per share data: | ||||||||||||||||
Diluted loss per share | $ | (0.75 | ) | $ | 0.01 | $ | (0.88 | ) | $ | (2.15 | ) | |||||
Basic weighted average shares outstanding | 26,616,696 | 26,683,363 | 26,442,791 | 26,683,363 | ||||||||||||
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Diluted weighted average shares outstanding | 26,616,696 | 27,791,353 | 26,442,791 | 26,683,363 | ||||||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2021 | 2020 | 2021 | |||||||||||||
Net broadcast revenue | $ | 39,470 | $ | 46,783 | $ | 84,650 | $ | 90,831 | ||||||||
Net digital media revenue | 9,443 | 10,339 | 18,547 | 19,958 | ||||||||||||
Net publishing revenue | 3,958 | 6,660 | 7,924 | 12,346 | ||||||||||||
Total net revenue | 52,871 | 63,782 | 111,121 | 123,135 | ||||||||||||
Operating expenses: | ||||||||||||||||
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $435 and $446 for the three months ended June 30, 2020 and 2021, respectively, and $866 and $889 for the six months ended June 30, 2020 and 2021, respectively, paid to related parties) | 33,094 | 36,162 | 70,421 | 69,505 | ||||||||||||
Digital media operating expenses, exclusive of depreciation and amortization shown below | 7,653 | 8,338 | 15,979 | 17,011 | ||||||||||||
Publishing operating expenses, exclusive of depreciation and amortization shown below | 5,567 | 6,426 | 10,629 | 11,631 | ||||||||||||
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $0 and $2 for the three months ended June 30, 2020 and 2021, respectively, and $180 and $5 for the six months ended June 30, 2020 and 2021, respectively, paid to related parties) | 3,850 | 4,192 | 8,060 | 8,480 | ||||||||||||
Depreciation | 2,718 | 2,741 | 5,431 | 5,330 | ||||||||||||
Amortization | 840 | 545 | 1,827 | 1,126 | ||||||||||||
Change in the estimated fair value of contingent earn-out consideration | 3 | — | (2 | ) | — | |||||||||||
Impairment of indefinite-lived long-term assets other than goodwill | — | — | 17,254 | — | ||||||||||||
Impairment of goodwill | — | — | 307 | — | ||||||||||||
Net (gain) loss on the disposition of assets | 34 | (263 | ) | 113 | 55 | |||||||||||
Total operating expenses | 53,759 | 58,141 | 130,019 | 113,138 | ||||||||||||
Operating income (loss) | (888 | ) | 5,641 | (18,898 | ) | 9,997 | ||||||||||
Other income (expense): | ||||||||||||||||
Interest income | — | — | — | 1 | ||||||||||||
Interest expense | (4,013 | ) | (3,935 | ) | (8,045 | ) | (7,861 | ) | ||||||||
Gain on early retirement of long-term debt | — | — | 49 | — | ||||||||||||
Net miscellaneous income and (expenses) | 6 | 63 | (46 | ) | 85 | |||||||||||
Net income (loss) before income taxes | (4,895 | ) | 1,769 | (26,940 | ) | 2,222 | ||||||||||
Provision for (benefit from) income taxes | (2,380 | ) | (488 | ) | 30,779 | (358 | ) | |||||||||
Net income (loss) | $ | (2,515 | ) | $ | 2,257 | $ | (57,719 | ) | $ | 2,580 | ||||||
Basic income (loss) per share data: | ||||||||||||||||
Basic income (loss) per share | $ | (0.09 | ) | $ | 0.08 | $ | (2.16 | ) | $ | 0.10 | ||||||
Diluted income (loss) per share data: | ||||||||||||||||
Diluted income (loss) per share | $ | (0.09 | ) | $ | 0.08 | $ | (2.16 | ) | $ | 0.10 | ||||||
Basic weighted average shares outstanding | 26,683,363 | 26,869,145 | 26,683,363 | 26,802,892 | ||||||||||||
Diluted weighted average shares outstanding | 26,683,363 | 27,232,423 | 26,683,363 | 27,185,598 | ||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Deficit | Treasury Stock | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Stockholders’ equity, December 31, 2019 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,680 | $ | (23,294 | ) | $ | (34,006 | ) | $ | 189,663 | ||||||||||||||||
Stock-based compensation | — | — | — | — | 103 | — | — | 103 | ||||||||||||||||||||||||
Cash distributions | — | — | — | — | — | (667 | ) | — | (667 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | (55,204 | ) | — | (55,204 | ) | ||||||||||||||||||||||
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Stockholders’ equity, March 31, 2020 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,783 | $ | (79,165 | ) | $ | (34,006 | ) | $ | 133,895 | ||||||||||||||||
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Distributions per share | $ | 0.025 | $ | 0.025 | ||||||||||||||||||||||||||||
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Stock-based compensation | — | — | — | — | 96 | — | — | 96 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | (2,515 | ) | — | (2,515 | ) | ||||||||||||||||||||||
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Stockholders’ equity, June 30, 2020 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,879 | $ | (81,680 | ) | $ | (34,006 | ) | $ | 131,476 | ||||||||||||||||
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Stock-based compensation | — | — | — | — | 74 | — | — | 74 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | 329 | — | 329 | ||||||||||||||||||||||||
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Stockholders’ equity, September 30, 2020 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,953 | $ | (81,351 | ) | $ | (34,006 | ) | $ | 131,879 | ||||||||||||||||
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| Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Earnings | Treasury Stock | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Stockholders’ equity, December 31, 2018 | 22,950,066 | $ | 227 | 5,553,696 | $ | 56 | $ | 245,220 | $ | 10,372 | $ | (34,006 | ) | $ | 221,869 | |||||||||||||||||
Stock-based compensation | — | — | — | — | 176 | — | — | 176 | ||||||||||||||||||||||||
Cash distributions | — | — | — | — | — | (1,702 | ) | — | (1,702 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | 322 | — | 322 | ||||||||||||||||||||||||
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Stockholders’ equity, March 31, 2019 | 22,950,066 | $ | 227 | 5,553,696 | $ | 56 | $ | 245,396 | $ | 8,992 | $ | (34,006 | ) | $ | 220,665 | |||||||||||||||||
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Distributions per share | $ | 0.065 | $ | 0.065 | ||||||||||||||||||||||||||||
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Stock-based compensation | — | — | — | — | 936 | — | — | 936 | ||||||||||||||||||||||||
Options exercised | 200 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Lapse of restricted shares | 389,061 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Cash distributions | — | — | — | — | — | (1,728 | ) | — | (1,728 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | (3,644 | ) | — | (3,644 | ) | ||||||||||||||||||||||
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Stockholders’ equity, June 30, 2019 | 23,339,327 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,332 | $ | 3,620 | $ | (34,006 | ) | $ | 216,229 | |||||||||||||||||
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Distributions per share | $ | 0.065 | $ | 0.065 | ||||||||||||||||||||||||||||
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Stock-based compensation | — | — | — | — | 177 | — | — | 177 | ||||||||||||||||||||||||
Options exercised | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Lapse of restricted shares | 41,323 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Cash distributions | — | — | — | — | — | (1,730 | ) | — | (1,730 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | (20,005 | ) | — | (20,005 | ) | ||||||||||||||||||||||
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Stockholders’ equity, September 30, 2019 | 23,380,650 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,509 | $ | (18,115 | ) | $ | 34,006 | ) | $ | 194,671 | ||||||||||||||||
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Distributions per share | $ | 0.065 | $ | 0.065 | ||||||||||||||||||||||||||||
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Class A Common Stock | Class B Common Stock | Additional | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-In Capital | Accumulated Deficit | Treasury Stock | Total | |||||||||||||||||||||||||
Stockholders’ equity, December 31, 2019 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,680 | $ | (23,294 | ) | $ | (34,006 | ) | $ | 189,663 | ||||||||||||||||
Stock-based compensation | — | — | — | — | 103 | — | — | 103 | ||||||||||||||||||||||||
Cash distributions | — | — | — | — | — | (667 | ) | — | (667 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | (55,204 | ) | — | (55,204 | ) | ||||||||||||||||||||||
Stockholders’ equity, March 31, 2020 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,783 | $ | (79,165 | ) | $ | (34,006 | ) | $ | 133,895 | ||||||||||||||||
Distributions per share | $ | 0.025 | $ | 0.025 | ||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 96 | — | — | 96 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | (2,515 | ) | — | (2,515 | ) | ||||||||||||||||||||||
Stockholders’ equity, June 30, 2020 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 246,879 | $ | (81,680 | ) | $ | (34,006 | ) | $ | 131,476 | ||||||||||||||||
Class A Common Stock | Class B Common Stock | Additional | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-In Capital | Accumulated Deficit | Treasury Stock | Total | |||||||||||||||||||||||||
Stockholders’ equity, December 31, 2020 | 23,447,317 | $ | 227 | 5,553,696 | $ | 56 | $ | 247,025 | $ | (78,023 | ) | $ | (34,006 | ) | $ | 135,279 | ||||||||||||||||
Stock-based compensation | — | — | — | — | 78 | — | — | 78 | ||||||||||||||||||||||||
Options exercised | 185,782 | 2 | — | — | 390 | — | — | 392 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | 323 | — | 323 | ||||||||||||||||||||||||
Stockholders’ equity, March 31, 2021 | 23,633,099 | $ | 229 | 5,553,696 | $ | 56 | $ | 247,493 | $ | (77,700 | ) | $ | (34,006 | ) | $ | 136,072 | ||||||||||||||||
Stock-based compensation | — | — | — | — | 84 | — | — | 84 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | 2,257 | — | 2,257 | ||||||||||||||||||||||||
Stockholders’ equity, June 30, 2021 | 23,633,099 | $ | 229 | 5,553,696 | $ | 56 | $ | 247,577 | $ | (75,443 | ) | $ | (34,006 | ) | $ | 138,413 | ||||||||||||||||
not
| Nine Months Ended September 30, | ||||||||
| 2019 | 2020 | |||||||
OPERATING ACTIVITIES | ||||||||
Net loss | $ | (23,327 | ) | $ | (57,390 | ) | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Non-cash stock-based compensation | 1,289 | 273 | ||||||
Depreciation and amortization | 12,096 | 10,686 | ||||||
Amortization of deferred financing costs | 766 | 675 | ||||||
Non-cash lease expense | 6,735 | 6,745 | ||||||
Accretion of acquisition-related deferred payments and contingent consideration | 2 | — | ||||||
Provision for bad debts | 1,407 | 4,122 | ||||||
Deferred income taxes | 487 | 30,954 | ||||||
Change in the estimated fair value of contingent earn-out consideration | (40 | ) | (12 | ) | ||||
Impairment of indefinite-lived long-term assets other than goodwill | 1,915 | 17,254 | ||||||
Impairment of goodwill | — | 307 | ||||||
Gain on early retirement of long-term debt | (426 | ) | (49 | ) | ||||
Net (gain) loss on the disposition of assets | 21,212 | 1,494 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and unbilled revenue | (2,363 | ) | 2,565 | |||||
Inventories | (372 | ) | 99 | |||||
Prepaid expenses and other current assets | 338 | (1,343 | ) | |||||
Accounts payable and accrued expenses | 4,504 | 5,871 | ||||||
Operating lease liabilities | (7,983 | ) | (6,396 | ) | ||||
Contract liabilities | (1,710 | ) | 5,274 | |||||
Deferred rent income | (130 | ) | (268 | ) | ||||
Other liabilities | (16 | ) | 2,254 | |||||
Income taxes payable | 87 | 30 | ||||||
|
|
|
| |||||
Net cash provided by operating activities | 14,471 | 23,145 | ||||||
|
|
|
| |||||
INVESTING ACTIVITIES | ||||||||
Cash paid for capital expenditures net of tenant improvement allowances | (6,064 | ) | (3,565 | ) | ||||
Capital expenditures reimbursable under tenant improvement allowances and trade agreements | (3 | ) | (140 | ) | ||||
Purchases of broadcast assets and radio stations | (35 | ) | — | |||||
Purchases of digital media businesses and assets | (1,250 | ) | (400 | ) | ||||
Proceeds from sale of assets | 4,202 | 188 | ||||||
Other | (725 | ) | 2,010 | |||||
|
|
|
| |||||
Net cash used in investing activities | (3,875 | ) | (1,907 | ) | ||||
|
|
|
| |||||
FINANCING ACTIVITIES | ||||||||
Payments to repurchase 6.75% Senior Secured Notes | (6,123 | ) | (3,392 | ) | ||||
Proceeds from borrowings under ABL Facility | 86,367 | 38,626 | ||||||
Payments on ABL Facility | (87,962 | ) | (34,452 | ) | ||||
Refund (payments) of debt issuance costs | (43 | ) | (124 | ) | ||||
Payments on financing lease liabilities | (65 | ) | (52 | ) | ||||
Payment of cash distribution on common stock | (5,160 | ) | (667 | ) | ||||
Book overdraft | 2,280 | (1,885 | ) | |||||
|
|
|
| |||||
Net cash used in financing activities | (10,706 | ) | (1,946 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in cash and cash equivalents | (110 | ) | 19,292 | |||||
Cash and cash equivalents at beginning of year | 117 | 6 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of period | $ | 7 | $ | 19,298 | ||||
|
|
|
| |||||
Six Months Ended June 30, | ||||||||
2020 | 2021 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (57,719 | ) | $ | 2,580 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Non-cash stock-based compensation | 199 | 162 | ||||||
Depreciation and amortization | 7,258 | 6,456 | ||||||
Amortization of deferred financing costs | 461 | 426 | ||||||
Non-cash lease expense | 4,464 | 4,348 | ||||||
Provision for bad debts | 3,621 | (325 | ) | |||||
Deferred income taxes | 30,629 | (403 | ) | |||||
Change in the estimated fair value of contingent earn-out consideration | (2 | ) | — | |||||
Impairment of indefinite-lived long-term assets other than goodwill | 17,254 | — | ||||||
Impairment of goodwill | 307 | — | ||||||
Gain on early retirement of long-term debt | (49 | ) | — | |||||
Net (gain) loss on the disposition of assets | 113 | 55 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and unbilled revenue | 5,530 | 421 | ||||||
Inventories | 10 | (224 | ) | |||||
Prepaid expenses and other current assets | 97 | (319 | ) | |||||
Accounts payable and accrued expenses | 1,720 | 453 | ||||||
Operating leas e liabilities | (3,403 | ) | (4,931 | ) | ||||
Contract liabilities | 7,267 | 1,310 | ||||||
Deferred rent income | (151 | ) | 111 | |||||
Other liabilities | 1,204 | 35 | ||||||
Income taxes payable | 155 | 42 | ||||||
Net cash provided by operating activities | 18,965 | 10,197 | ||||||
INVESTING ACTIVITIES | ||||||||
Cash paid for capital expenditures net of tenant improvement allowances | (2,525 | ) | (3,994 | ) | ||||
Capital expenditures reimbursable under tenant improvement allowances and trade agreements | (94 | ) | (19 | ) | ||||
Deposit on broadcast assets and radio station acquisitions | — | (100 | ) | |||||
Purchases of broadcast assets and radio stations | — | (600 | ) | |||||
Purchases of digital media businesses and assets | — | (1,300 | ) | |||||
Proceeds from sale of assets | 188 | 3,627 | ||||||
Proceeds from the cash surrender value of life insurance policies | 2,363 | — | ||||||
Other | (384 | ) | (814 | ) | ||||
Net cash used in investing activities | (452 | ) | (3,200 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Payments to repurchase 6.75% Senior Secured Notes | (3,392 | ) | 0 | |||||
Proceeds from borrowings under ABL Facility | 38,349 | 16 | ||||||
Payments on ABL Facility | (31,775 | ) | (5,016 | ) | ||||
Proceeds from borrowings under PPP Loans | — | 11,195 | ||||||
Payments of debt issuance costs | (66 | ) | (19 | ) | ||||
Proceeds from the exercise of stock options | — | 392 | ||||||
Payments on financing lease liabilities | (35 | ) | (32 | ) | ||||
Payment of cash distribution on common stock | (667 | ) | — | |||||
Book overdraft | (1,885 | ) | — | |||||
Net cash provided by financing activities | 529 | 6,536 | ||||||
Net increase in cash and cash equivalents | 19,042 | 13,533 | ||||||
Cash and cash equivalents at beginning of year | 6 | 6,325 | ||||||
Cash and cash equivalents at end of period | $ | 19,048 | $ | 19,858 | ||||
| Nine Months Ended September 30, | ||||||||
| 2019 | 2020 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Cash paid for interest, net of capitalized interest | $ | 8,568 | $ | 7,731 | ||||
Cash paid for interest on finance lease liabilities | $ | 7 | $ | 6 | ||||
Cash paid for income taxes | $ | 122 | $ | 196 | ||||
Other supplemental disclosures of cash flow information: | ||||||||
Barter revenue | $ | 4,113 | $ | 2,152 | ||||
Barter expense | $ | 3,673 | $ | 1,971 | ||||
Non-cash investing and financing activities: | ||||||||
Capital expenditures reimbursable under tenant improvement allowances | $ | 3 | $ | 140 | ||||
Deferred payments on acquisitions | $ | — | $ | 708 | ||||
Right-of-use assets acquired through operating leases | $ | 1,854 | $ | 2,715 | ||||
Right-of-use assets acquired through financing leases | $ | 14 | $ | — | ||||
Non-cash capital expenditures for property & equipment acquired under trade agreements | $ | — | $ | 4 | ||||
Six Months June 30, | ||||||||
2020 | 2021 | |||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Cash paid for interest, net of capitalized interest | $ | 7,600 | $ | 7,391 | ||||
Cash paid for interest on finance lease liabilities | $ | 4 | $ | 4 | ||||
Net cash paid for (received from) income taxes | $ | (5 | ) | $ | 3 | |||
Other supplemental disclosures of cash flow information: | ||||||||
Barter revenue | $ | 1,705 | $ | 1,065 | ||||
Barter expense | $ | 1,558 | $ | 1,092 | ||||
Non-cash investing and financing activities: | ||||||||
Capital expenditures reimbursable under tenant improvement allowances | $ | 94 | $ | 19 | ||||
Right-of-use | $ | 2,655 | $ | 1,957 | ||||
Right-of-use | $ | — | $ | 4 | ||||
Non-cash capital expenditures for property & equipment acquired under trade agreements | $ | 4 | $ | 27 | ||||
Net assets and liabilities assumed in a non-cash acquisition | $ | — | $ | 129 | ||||
Estimated present value of contingent-earn out consideration | $ | — | $ | 11 | ||||
In
Future Our businesses could also continue to be impacted by the disruptions from
offering extended payment terms of up to 90 days to limit cancellations and entice new business;
considering sales-leaseback of owned facilities; and
and we may be entitled to benefits under the deferralCAA based on our individual locations, including:
9
believe that the borrowing capacity under our current credit facilities, together with cash on hand, allows us to meet our ongoing operating requirements, fund necessary capital expenditures and satisfy our debt service requirements for at least the next twelve months, including the working capital deficit at September 30, 2020. Based on our current assessment, we believe that we have the ability to meet our obligations as they come due for one year from the issuance of these financial statements.
condition in future periods.
The ultimate impact of these disruptions, including the extent of their adverse impact on our financial and operating results, will be affected by the length of time that such disruptions continue, which will, in turn, depend on the currently unknown duration of the COVID-19 pandemic and the impact of governmental regulations and other restrictions that have been or may be imposed in response to the pandemic. Our businesses could also continue to be impacted by the disruptions from COVID-19 and resulting adverse changes in advertising customers and consumer behavior.
Cyber Incident
On August 7, 2020, we detected a ransomware attack impacting certain of our operational and information technology systems. We launched an investigation, notified law enforcement and engaged the services of specialized incident response professionals. We have recovered many of our business systems and critical operational data. Based on our investigation, the incident has not had a material impact on our business, operations or financial condition. We believe that our cyber insurance coverage is commensurate with our size and the nature of its operations.
Certain reclassifications have been made to the prior year financial statements to conform to the presentation in the current year, which had no impact on the previously reported financial statements.
10
On
11
We completed repurchases of $3.5$15.0 million of the 6.75% Senior Secured Notes (“Notes”) for $3.4 million in cash, recognizing a net gain of $49,000 after adjusting for bond issuance costscompany’s Class A Common Stock pursuant to an
Equity Transactions
Distributions of $0.7 million ($0.025 per share) were declared and paid in March 2020 based upon our Board of Directors’ (“Board”) then current assessmentsales agent.
Acquisitions
our consolidated results of operations from their respective closing date or the date that we began operating them under an LMA or TBA.
purchase agreement, we may pay up to an additional $11,000 in contingent
Acquisition Date | Description | Total Cost | ||||
| (Dollars in thousands) | ||||||
September 15, 2020 | Hyper Pixels (business acquisition) | $ | 1,108 | |||
|
| |||||
| $ | 1,108 | |||||
|
| |||||
Acquisition Date | Description | Total Consideration | ||||
(Dollars in thousands) | ||||||
June 1, 2021 | KDIA-AM and KDYA-AM San Francisco, California (business acquisition) | $ | 600 | |||
April 28, 2021 | Centerline New Media (business acquisition) | 1,300 | ||||
March 8, 2021 | Triple Threat Trader (asset acquisition) | 127 | ||||
$ | 2,027 | |||||
12
The following table summarizes the total acquisitionpurchase price consideration for our business acquisitions and asset purchases the nine months ended September
Description | Total Consideration | |||
| (Dollars in thousands) | ||||
Cash payments made upon closing | $ | 400 | ||
Deferred payments | 700 | |||
Closing costs accrued for business acquisitions | 8 | |||
|
| |||
Total purchase price consideration | $ | 1,108 | ||
|
| |||
2021, is as follows:
Description | Total Consideration | |||
(Dollars in thousands) | ||||
Cash payments made upon closing | $ | 1,900 | ||
Deferred payments | 116 | |||
Present value of estimated fair value of contingent earn-out consideration | 11 | |||
Total purchase price consideration | $ | 2,027 | ||
| Net Digital Media Assets Acquired | Net Total Assets Acquired | |||||||
Assets | ||||||||
Property and equipment | $ | 866 | $ | 866 | ||||
Goodwill | 66 | 66 | ||||||
Customer lists and contracts | 179 | 179 | ||||||
Domain and brand names | 18 | 18 | ||||||
|
|
|
| |||||
| $ | 1,129 | $ | 1,129 | |||||
|
|
|
| |||||
Liabilities | ||||||||
Contract liabilities | $ | (21 | ) | $ | (21 | ) | ||
|
|
|
| |||||
| $ | 1,108 | $ | 1,108 | |||||
|
|
|
| |||||
Net Broadcast Assets Acquired | Net Digital Assets Acquired | Total Net Assets | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Assets | ||||||||||||||
| Property and equipment | $ | 361 | $ | 1,080 | $ | 1,441 | ||||||||
| Broadcast licenses | 235 | 0 | 235 | |||||||||||
| Goodwill | 4 | 24 | 28 | |||||||||||
| Customer lists and contracts | 0 | 314 | 314 | |||||||||||
| Domain and brand names | 0 | 22 | 22 | |||||||||||
$ | 600 | $ | 1,440 | $ | 2,040 | |||||||||
Liabilities | ||||||||||||||
| Contract liabilities, short-term | 0 | (13 | ) | (13 | ) | |||||||||
$ | 600 | $ | 1,427 | $ | 2,027 | |||||||||
Pending Transactions
On September 10, 2020, we entered an Asset Purchase Agreement (“APA”) to sell radio station WKAT-AM and an FM translator in Miami, Florida, for $3.5 million in cash. We will exit the Miami market upon the close of this transaction. We entered a Local Marketing Agreement (“LMA”) under which the buyer will begin programming the station in November 2020. We recognized an estimated pre-tax loss of $1.4 million during the three-month period ended September 30, 2020, which reflects the sale price as compared to the carrying value of the assetsbe sold, the estimated closing costs, and theThis transaction is subjectWe adjusted theapprovalassets included in the sale.
a TBA that began in January 2017.
Our acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. The fair value of the contingent earn-out consideration is estimated as of the acquisition date at the present value of the expected contingent payments to be made using a probability-weighted discounted cash flow model for probabilities of possible future payments. The present value of the expected future payouts is accreted to interest expense over the earn-out period. The fair value estimates use unobservable inputs that reflect our own assumptions as to the ability of the acquired business to meet the targeted benchmarks and discount rates used in the calculations. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14.
We review the probabilities of possible future payments to the estimated fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable. Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.
13
At September 30, 2020, our estimated contingent earn-out liability was $7,000 compared to $19,000 at December 31, 2019. The changes in our estimate of the contingent earn-out liability reflect volatility from variables, including revenue growth, page views or session time. We made no cash payments for contingent earn-out consideration during the nine months ended September 30, 2020.
NOTE 5. REVENUE RECOGNITION
RECOGNITION
Identification of the contract, or contracts, with a customer
A contract with a customer exists when (i)principal. If we enter into an enforceable contract with a customer that defines each party’s rights regardingdo not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.
| Short-Term | Long-Term | |||||||
(Dollars in thousands) | ||||||||
Balance, beginning of period January 1, 2021 | $ | 11,652 | $ | 1,869 | ||||
Revenue recognized during the period that was included in the beginning balance of contract liabilities | (6,292 | ) | — | |||||
Additional amounts recognized during the period | 13,531 | 756 | ||||||
Revenue recognized during the period that was recorded during the period | (6,948 | ) | — | |||||
Transfers | 458 | (458 | ) | |||||
Balance, end of period June 30, 2021 | $ | 12,401 | $ | 2,167 | ||||
Amount refundable at beginning of period | $ | 11,607 | $ | 1,869 | ||||
Amount refundable at end of period | $ | 12,389 | $ | 2,167 | ||||
Amount | ||||
For the Twelve Months Ended June 30, | (Dollars in thousands) | |||
2022 | $ | 12,401 | ||
2023 | 1,225 | |||
2024 | 608 | |||
2025 | 209 | |||
2026 | 68 | |||
Thereafter | 57 | |||
| $ | 14,568 | |||
We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
Identification of theas performance obligations in the contract
Performance obligations promised in a contractif they are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinctimmaterial in the context of the contract wherebywith the transfer of the goods or services is separately identifiablecustomer;
When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.
Determination of the transaction price
The transaction price is determined based onprice;
Allocation of the transaction price to theunsatisfied performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations requirefor contracts with an allocationoriginal expected length of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. If the SSP is not observable, we estimate the SSP based on available information, including market conditions and any applicable internally approved pricing guidelines.
Recognition of revenue when,one year or as, we satisfy a performance obligation
We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer.
less.
14
andthe sale of advertisements on our own and operated mobile applications. Eachapplications, the sale of our radio stations, ouradvertisements in digital media entitiesnewsletters that we produce, the sale of advertising in streaming and certainpodcasts, and the sale of our publishing entities have custom websites and mobile applications that generate digital advertising revenue.solutions, such as web pages and social media campaigns, that we offer to our customers. Digital advertising revenue is recognized at the time that the banner displayadvertisement is delivered, or when the number of impressions delivered meets the previously agreed-upon performance criteria, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Digital advertising revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.Broadcast digital advertising revenue consists of local digital advertising, such as the sale of banner advertisements on our owned and operated websites, the sale of advertisements on our own and operated mobile applications, and advertisements in digital newsletters that we produce, as well an national digital advertising, or the sale of custom digital advertising solutions, such as web pages and social media campaigns, that we offer to our customers. Advertising revenue is recorded on a gross basis unless an agency represents the advertiser, in which case, revenue is reported net of the commission retained by the agency. national multimedia advertising agency, offers a comprehensive suite of digital marketing services to develop and execute audience-based marketing strategies for clients on both the national and local level. Salem Surround specializes in digital marketing services for each of our radio stations and websites as well as provides a full-service digital marketing strategy for each of our clients. In our role as a digital agency, our sales team provides our customers with integrated digital advertising solutions that optimize the performance of their campaign, which we view as one performance obligation. Our advertising campaigns are designed to be “white label” agreements between Salem and our advertiser, meaning we provide special care and attention to the details of the campaign. We provide custom digital product offerings, including tools for metasearch, retargeting, website design, reputation management, online listing services, and social media marketing. Digital advertising solutions may include third-party websites, such as Google or Facebook, which can be included in a digital advertising social media campaign. We manage all aspects of the digital campaign, including social media placements, review and approval of target audiences, and the monitoring of actual results to make modifications as needed. We may contract directly with a third-party, however, we are responsible for delivering the campaign results to our customer with or without the third-party. We are responsible for any payments due to the third-party regardless of the campaign results and without regard to the status of payment from our customer. We have discretion in setting the price to our customer without input or approval from the third-party. Accordingly, revenue is reported gross, as principal, as the performance obligation is delivered, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. of our publishing entities have custom websites and mobile applications that generate streaming revenue. Digital streaming revenue is recognized at the time that the content is delivered, or when the number of impressions delivered meets the previously agreed-upon performance criteria. Delivery of the content represents the point in time that control is transferred to the customer thereby completing our performance obligation. Streaming revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.liabilities.labilities. Revenue is recognized ratably over the subscription term at the point in time that each publication is transmitted or shipped, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is reported net of estimated cancellations, which are based on our experience and historical cancellation rates during the cancellable period.15“used”used regardless of the condition upon return.returned. Our experience with unsold or returned books is that their resale value is not significantinsignificant and they are often destroyed or disposed of.
Advertising -
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Net broadcast barter revenue | $ | 1,366 | $ | 444 | $ | 4,080 | $ | 2,118 | ||||||||
Net digital media barter revenue | — | — | — | — | ||||||||||||
Net publishing barter revenue | 17 | 3 | 33 | 34 | ||||||||||||
Net broadcast barter expense | $ | 1,199 | $ | 413 | $ | 3,667 | $ | 1,971 | ||||||||
Net digital media barter expense | — | — | — | — | ||||||||||||
Net publishing barter expense | 5 | — | 6 | — | ||||||||||||
16
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2021 | 2020 | 2021 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net broadcast barter revenue | $ | 508 | $ | 674 | $ | 1,674 | $ | 1,065 | ||||||||
Net digital media barter revenue | — | — | — | — | ||||||||||||
Net publishing barter revenue | 5 | — | 31 | — | ||||||||||||
Net broadcast barter expense | $ | 524 | $ | 712 | $ | 1,558 | $ | 1,085 | ||||||||
Net digital media barter expense | — | — | — | — | ||||||||||||
Net publishing barter expense | — | 7 | — | 7 | ||||||||||||
Contract Assets
Contract Assets - Costs to Obtain a Contract: We capitalize commissions paid to sales personnel in our self-publishing business when customer contracts are signed and advance payment is received. These capitalized costs are recorded as prepaid commission expense in the Consolidated Balance Sheets. The amount capitalized is incremental to the contract and would not have been incurred absent the executionTable of the customer contract. Commissions paid upon the initial acquisition of a contract are expensed at the point in time that related revenue is recognized. Prepaid commissions are periodically reviewed for impairment. At September 30, 2020, our prepaid commission expense was $0.7 million.
Contract Liabilities
Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. Additionally, new customers, existing customers without approved credit terms and authors purchasing specific self-publishing services, are required to make payments in advance of the delivery of the products or performance of the services. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities are reported as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. Long-term contract liabilities represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year. Our long-term liabilities consist of subscriptions with a term of two-years for which some customers have purchased and paid for multiple years.
Significant changes in our contract liabilities balances during the period are as follows:
| Short-Term | Long-Term | |||||||
| (Dollars in thousands) | ||||||||
Balance, beginning of period January 1, 2020 | $ | 9,493 | $ | 1,744 | ||||
| Revenue recognized during the period that was included in the beginning balance of contract liabilities | (6,123 | ) | — | |||||
Additional amounts recognized during the period | 21,022 | 678 | ||||||
Revenue recognized during the period that was recorded during the period | (10,283 | ) | — | |||||
Transfers | 604 | (604 | ) | |||||
|
|
|
| |||||
Balance, end of period September 30, 2020 | $ | 14,713 | $ | 1,818 | ||||
|
|
|
| |||||
Amount refundable at beginning of period | $ | 9,403 | $ | 1,744 | ||||
Amount refundable at end of period | $ | 14,648 | $ | 1,818 | ||||
We expect to satisfy these performance obligations as follows:
| Amount | ||||
| For the Twelve Months Ended September 30, | (Dollars in thousands) | |||
2021 | $ | 14,713 | ||
2022 | 618 | |||
2023 | 689 | |||
2024 | 266 | |||
2025 | 128 | |||
Thereafter | 117 | |||
|
| |||
| $ | 16,531 | |||
|
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Contents
| Nine Months Ended September 30, 2020 | ||||||||||||||||
| Broadcast | Digital Media | Publishing | Consolidated | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| By Source of Revenue: | ||||||||||||||||
Block Programming - National | $ | 35,536 | $ | — | $ | — | $ | 35,536 | ||||||||
Block Programming - Local | 18,211 | — | — | 18,211 | ||||||||||||
Spot Advertising - National | 10,179 | — | — | 10,179 | ||||||||||||
Spot Advertising - Local | 28,630 | — | — | 28,630 | ||||||||||||
Infomercials | 750 | — | — | 750 | ||||||||||||
Network | 13,505 | — | — | 13,505 | ||||||||||||
Digital Advertising | 10,676 | 14,473 | 216 | 25,365 | ||||||||||||
Digital Streaming | 1,981 | 2,611 | — | 4,592 | ||||||||||||
Digital Downloads and eBooks | 3,049 | 4,291 | 960 | 8,300 | ||||||||||||
Subscriptions | 868 | 6,679 | 519 | 8,066 | ||||||||||||
Book Sales and e-commerce, net of estimated sales returns and allowances | 1,128 | 108 | 6,849 | 8,085 | ||||||||||||
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Six Months Ended June 30, 2021 | ||||||||||||||||
Broadcast | Digital Media | Publishing | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
By Source of Revenue: | ||||||||||||||||
Block Programming—National | $ | 23,322 | $ | — | $ | — | $ | 23,322 | ||||||||
Block Programming—Local | 11,773 | — | — | 11,773 | ||||||||||||
Spot Advertising—National | 7,118 | — | — | 7,118 | ||||||||||||
Spot Advertising—Local | 19,441 | — | — | 19,441 | ||||||||||||
Infomercials | 462 | — | — | 462 | ||||||||||||
Network | 9,821 | — | — | 9,821 | ||||||||||||
Digital Advertising | 11,745 | 8,806 | 132 | 20,683 | ||||||||||||
Digital Streaming | 2,093 | 1,706 | — | 3,799 | ||||||||||||
Digital Downloads and eBooks | 200 | 3,173 | 792 | 4,165 | ||||||||||||
Subscriptions | 562 | 6,072 | 262 | 6,896 | ||||||||||||
Book Sales and e-commerce, net of estimated sales returns and allowances | 197 | 98 | 7,502 | 7,797 | ||||||||||||
Self-Publishing Fees | — | — | 3,174 | 3,174 | ||||||||||||
Print Advertising | — | — | 122 | 122 | ||||||||||||
Other Revenues | 4,097 | 103 | 362 | 4,562 | ||||||||||||
$ | 90,831 | $ | 19,958 | $ | 12,346 | $ | 123,135 | |||||||||
Timing of Revenue Recognition | ||||||||||||||||
Point in Time | $ | 89,583 | $ | 19,958 | $ | 12,346 | $ | 121,887 | ||||||||
Rental Income (1) | 1,248 | — | — | 1,248 | ||||||||||||
$ | 90,831 | $ | 19,958 | $ | 12,346 | $ | 123,135 | |||||||||
Six Months Ended June 30, 2020 | ||||||||||||||||
Broadcast | Digital Media | Publishing | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
By Source of Revenue: | ||||||||||||||||
Block Programming—National | $ | 23,804 | $ | — | $ | — | $ | 23,804 | ||||||||
Block Programming—Local | 12,440 | — | — | 12,440 | ||||||||||||
Spot Advertising—National | 6,544 | — | — | 6,544 | ||||||||||||
Spot Advertising—Local | 19,145 | — | — | 19,145 | ||||||||||||
Infomercials | 536 | — | — | 536 | ||||||||||||
Network | 8,614 | — | — | 8,614 | ||||||||||||
Digital Advertising | 6,483 | 9,260 | 151 | 15,894 | ||||||||||||
Digital Streaming | 1,229 | 1,768 | — | 2,997 | ||||||||||||
Digital Downloads and eBooks | — | 3,047 | 504 | 3,551 | ||||||||||||
Subscriptions | 573 | 4,292 | 351 | 5,216 | ||||||||||||
Book Sales and e-commerce, net of estimated sales returns and allowances | 1,663 | 55 | 3,861 | 5,579 | ||||||||||||
Self-Publishing Fees | — | — | 2,453 | 2,453 | ||||||||||||
Print Advertising | 1 | — | 193 | 194 | ||||||||||||
Other Revenues | 3,618 | 125 | 411 | 4,154 | ||||||||||||
$ | 84,650 | $ | 18,547 | $ | 7,924 | $ | 111,121 | |||||||||
Timing of Revenue Recognition | ||||||||||||||||
Point in Time | $ | 83,379 | $ | 18,547 | $ | 7,924 | $ | 109,850 | ||||||||
Rental Income (1) | 1,271 | — | — | 1,271 | ||||||||||||
$ | 84,650 | $ | 18,547 | $ | 7,924 | $ | 111,121 | |||||||||
Self-Publishing Fees | — | — | 3,860 | 3,860 | ||||||||||||
Print Advertising | 1 | — | 278 | 279 | ||||||||||||
Other Revenues | 5,527 | 193 | 684 | 6,404 | ||||||||||||
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| $ | 130,041 | $ | 28,355 | $ | 13,366 | $ | 171,762 | |||||||||
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| Timing of Revenue Recognition | ||||||||||||||||
Point in Time | $ | 128,157 | $ | 28,319 | $ | 13,366 | $ | 169,842 | ||||||||
Rental Income (1) | 1,884 | 36 | — | 1,920 | ||||||||||||
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| $ | 130,041 | $ | 28,355 | $ | 13,366 | $ | 171,762 | |||||||||
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| Nine Months Ended September 30, 2019 | ||||||||||||||||
| Broadcast | Digital Media | Publishing | Consolidated | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| By Source of Revenue: | ||||||||||||||||
Block Programming - National | $ | 36,517 | $ | — | $ | — | $ | 36,517 | ||||||||
Block Programming - Local | 22,867 | — | — | 22,867 | ||||||||||||
Spot Advertising - National | 11,956 | — | — | 11,956 | ||||||||||||
Spot Advertising - Local | 38,467 | — | — | 38,467 | ||||||||||||
Infomercials | 1,091 | — | — | 1,091 | ||||||||||||
Network | 13,923 | — | — | 13,923 | ||||||||||||
Digital Advertising | 8,558 | 15,136 | 290 | 23,984 | ||||||||||||
Digital Streaming | 557 | 2,947 | — | 3,504 | ||||||||||||
Digital Downloads and eBooks | — | 4,196 | 1,232 | 5,428 | ||||||||||||
Subscriptions | 825 | 6,076 | 581 | 7,482 | ||||||||||||
Book Sales and e-commerce, net of estimated sales returns and allowances | 294 | 468 | 9,342 | 10,104 | ||||||||||||
Self-Publishing Fees | — | — | 4,258 | 4,258 | ||||||||||||
Print Advertising | 25 | — | 474 | 499 | ||||||||||||
Other Revenues | 7,774 | 526 | 885 | 9,185 | ||||||||||||
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| $ | 142,854 | $ | 29,349 | $ | 17,062 | $ | 189,265 | |||||||||
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| Timing of Revenue Recognition | ||||||||||||||||
Point in Time | $ | 141,161 | $ | 29,301 | $ | 17,062 | $ | 187,524 | ||||||||
Rental Income (1) | 1,693 | 48 | — | 1,741 | ||||||||||||
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| $ | 142,854 | $ | 29,349 | $ | 17,062 | $ | 189,265 | |||||||||
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| (1) | Rental income is not applicable to ASC Topic 606, but shown for the purpose of identifying each revenue source presented in total revenue on our Condensed Consolidated Financial Statements within this report on Form 10-Q. |
Principal versus Agent Considerations
When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net
We are primarily responsible for fulfilling the promise to provide the specified good or service.
When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.
We have inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer.
We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.
The entity has discretion in establishing the price for the specified good or service.
We have discretion in establishing the price our customer pays for the specified goods or services.
Significant Financing Component
The length of our typical sales agreement is less than 12 months; however, we may sell subscriptions with a two-year term. The balance of our long-term contract liabilities represents the unsatisfied performance obligations for subscriptions with a remaining
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term in excess of one year. We review long-term contract liabilities that are expected to be completed in excess of one year to assess whether the contract contains a significant financing component. The balance includes subscriptions that will be satisfied at various dates between October 1, 2021 and September 30, 2025. The difference between the promised consideration and the cash selling price of the publications is not significant. Therefore, we have concluded that subscriptions do not contain a significant financing component under ASC 606.
Our self-publishing contracts may exceed a one-year term due to the length of time for an author to submit and approve a manuscript for publication. The author may pay for publishing services in installments over the production timeline with payments due in advance of performance. The timing of the transfer of goods and services under self-publishing arrangements are at the discretion of the author and based on future events that are not substantially within our control. We require advance payments to provide us with protection from incurring costs for products that are unique and only sellable to the author. Based on these considerations, we have concluded that our self-publishing contracts do not contain a significant financing component under ASC 606.
Variable Consideration
We make significant estimates related to variable consideration at the point of sale, including estimates for refunds and product returns. Under ASC 606, estimates of variable consideration are to be recognized before contingencies are resolved in certain circumstances, including when it is probable that a significant reversal in the amount of any estimated cumulative revenue will not occur.
We enter into agreements under which the amount of revenue we earn is contingent upon the amount of money raised by our customer over the contract term. Our customer is typically a charity or programmer that purchases blocks of programming time or spots to generate revenue from our audience members. Contract terms can range from a few weeks to a few months, depending the charity or programmer. If the campaign does not generate a pre-determined level of donations or revenue to our customer, the consideration that we expect to be entitled to may vary above a minimum base level per the contract. Historically, under ASC Topic 605, we reported variable consideration as revenue when the amount was fixed and determinable. Under ASC 606, variable consideration is to be estimated using the expected value or the most likely amount to the extent it is probable that a significant reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Based on the constraints for using estimates of variable consideration within ASC 606, and our historical experience with these campaigns, we will continue to recognize revenue at the base amount of the campaign with variable consideration recognized when the uncertainty of each campaign is resolved. These constraints include: (1) the amount of consideration received is highly susceptible to factors outside of our influence, specifically the extent to which our audience donates or contributes to our customer or programmer, (2) the length of time in which the uncertainty about the amount of consideration expected is to be resolved, and (3) our experience has shown these contracts have a large number and broad range of possible outcomes.
Practical Expedients and Exemptions
We elected certain practical expedients and policy elections as follows:
We do not adjust the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;
We do not assess promised goods or services as performance obligations if they are immaterial in the context of the contract with the customer;
We exclude sales and similar taxes from the transaction price;
We treat shipping and handling costs that occur after control transfers as fulfillment activities instead of assessing such activities as separate performance obligations; and
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
NOTE 6. INVENTORIES
Inventories consistfinished books from RegneryInventoriesAll inventories are valued at the lower of cost or net realizable value as determined on a
| December 31, 2019 | September 30, 2020 | |||||||
| (Dollars in thousands) | ||||||||
Book inventories | $ | 1,988 | $ | 2,065 | ||||
Reserve for obsolescence | (1,271 | ) | (1,447 | ) | ||||
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Inventory, net | $ | 717 | $ | 618 | ||||
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| December 31, 2020 | June 30, 2021 | |||||||
(Dollars in thousands) | ||||||||
Book inventories | $ | 1,994 | $ | 2,227 | ||||
Reserve for obsolescence | (1,499 | ) | (1,508 | ) | ||||
Inventory, net— | $ | 495 | $ | 719 | ||||
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The following is a summary of the categories of our property and equipment:
| As of December 31, 2019 | As of September 30, 2020 | |||||||
| (Dollars in thousands) | ||||||||
Land | $ | 30,936 | $ | 30,253 | ||||
Buildings | 30,283 | 28,946 | ||||||
Office furnishings and equipment | 36,855 | 36,610 | ||||||
Antennae, towers and transmitting equipment | 78,312 | 77,874 | ||||||
Studio, production and mobile equipment | 30,164 | 28,996 | ||||||
| Computer software and website development costs | 29,595 | 32,637 | ||||||
Record and tape libraries | 17 | 17 | ||||||
Automobiles | 1,509 | 1,514 | ||||||
Leasehold improvements | 18,834 | 18,207 | ||||||
Construction-in-progress | 4,290 | 3,401 | ||||||
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| $ | 260,795 | $ | 258,455 | |||||
Less accumulated depreciation | (173,122 | ) | (177,732 | ) | ||||
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| $ | 87,673 | $ | 80,723 | |||||
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| December 31, 2020 | June 30, 2021 | |||||||
(Dollars in thousands) | ||||||||
Land | $ | 30,254 | $ | 30,254 | ||||
Buildings | 28,922 | 28,971 | ||||||
Office furnishings and equipment | 36,875 | 37,229 | ||||||
Antennae, towers and transmitting equipment | 78,057 | 78,549 | ||||||
Studio, production, and mobile equipment | 29,023 | 29,303 | ||||||
Computer software and website development costs | 33,928 | 35,258 | ||||||
Record and tape libraries | 17 | — | ||||||
Automobiles | 1,514 | 1,514 | ||||||
Leasehold improvements | 18,187 | 18,546 | ||||||
Construction-in-progress | 2,681 | 4,312 | ||||||
| $ | 259,458 | $ | 263,936 | |||||
Less accumulated depreciation | (180,336 | ) | (184,521 | ) | ||||
| $ | 79,122 | $ | 79,415 | |||||
2021.
Due to the adverse economic impact of the COVID-19 pandemic, we began negotiating with landlords in April 2020 to obtain rent concessions in order to improve short-term liquidity. We withheld portions of and/or delayed payments to landlords as we negotiated terms. Total payments withheld at September 30, 2020 were approximately $0.3 million and are included in current lease liabilities. Additional negotiations of payment terms are still in process.
In some instances, the renegotiations have led to agreements with landlords for rent abatements or rental deferrals. In accordance with the FASB’s recent Staff Q&A regarding rent concessions related to the effects of the COVID-19 pandemic, we will not apply the lease modification guidance under ASC 842 to rent concessions that result in the total payments required under the modified contract that are substantially the same as or less than total payments required by the original contract. If other terms of the lease are changed or renegotiated in connection with the concession process, then the changes will be treated as a modification in accordance with ASC 842.
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For qualifying rent abatement concessions, we recorded negative lease expense for abatement during the period of relief. During the nine months ended September 30, 2020, we recognized negative lease expense related to rent abatement concessions of $0.3 million. Additionally, we deferred cash payments of $0.6 million as of September 30, 2020 that are included in short-term and long-term operating lease liabilities as applicable based on repayment terms that range from October 2020 through December 2024.
| September 30, 2020 | ||||||||||||
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| Operating Leases | Related Party | Other | Total | |||||||||
Operating leases ROU assets | $ | 7,186 | $ | 41,816 | $ | 49,002 | ||||||
Operating lease liabilities (current) | $ | 1,054 | $ | 7,904 | $ | 8,958 | ||||||
Operating lease liabilities (non-current) | 6,408 | 42,644 | 49,052 | |||||||||
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Total operating lease liabilities | $ | 7,462 | $ | 50,548 | $ | 58,010 | ||||||
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Operating Leases | Related Party | Other | Total | |||||||||
Operating leases ROU assets | $ | 6,363 | $ | 38,563 | $ | 44,926 | ||||||
Operating lease liabilities (current) | $ | 954 | $ | 7,814 | $ | 8,768 | ||||||
Operating lease liabilities (non-current) | 5,577 | 38,472 | 44,049 | |||||||||
Total operating lease liabilities | $ | 6,531 | $ | 46,286 | $ | 52,817 | ||||||
Weighted Average Remaining Lease Term | ||||
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Operating leases | 7.9 years | |||
Finance leases | 2.8 years | |||
Weighted Average Discount Rate | ||||
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Operating leases | 7.95 | % | ||
Finance leases | % |
| Nine Months Ended September 30, 2020 | ||||
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Amortization of finance lease ROU Assets | $ | 54 | ||
Interest on finance lease liabilities | 6 | |||
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Finance lease expense | 60 | |||
Operating lease expense | 10,720 | |||
Variable lease expense | 558 | |||
Short-term lease expense | 460 | |||
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Total lease expense | $ | 11,798 | ||
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Six Months Ended June 30, 2021 | ||||
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Amortization of finance lease ROU Assets | $ | 32 | ||
Interest on finance lease liabilities | 4 | |||
Finance lease expense | 36 | |||
Operating lease expense | 6,438 | |||
Variable lease expense | 310 | |||
Short-term lease expense | 352 | |||
Total lease expense | $ | 7,136 | ||
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Six Months Ended June 30, 2021 | ||||
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Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | 7,097 | ||
Operating cash flows from finance leases | 2 | |||
Financing cash flows from finance leases | 32 | |||
Leased assets obtained in exchange for new operating lease liabilities | $ | 1,957 | ||
Leased assets obtained in exchange for new finance lease liabilities | 4 | |||
| Related Parties | Other Operating Leases | Total Operating Leases | Finance Leases | Total | ||||||||||||||||
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2021 | $ | 1,624 | $ | 11,409 | $ | 13,033 | $ | 60 | $ | 13,093 | ||||||||||
2022 | 1,606 | 10,876 | 12,482 | 47 | 12,529 | |||||||||||||||
2023 | 1,319 | 9,828 | 11,147 | 32 | 11,179 | |||||||||||||||
2024 | 1,016 | 7,492 | 8,508 | 11 | 8,519 | |||||||||||||||
2025 | 1,028 | 5,971 | 6,999 | 1 | 7,000 | |||||||||||||||
Thereafter | 4,323 | 27,187 | 31,510 | 0 | 31,510 | |||||||||||||||
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Undiscounted Cash Flows | $ | 10,916 | $ | 72,763 | $ | 83,679 | $ | 151 | $ | 83,830 | ||||||||||
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Less: imputed interest | (3,454 | ) | (22,215 | ) | (25,669 | ) | (9 | ) | (25,678 | ) | ||||||||||
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Total | $ | 7,462 | $ | 50,548 | $ | 58,010 | $ | 142 | $ | 58,152 | ||||||||||
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Reconciliation to lease liabilities: |
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Lease liabilities - current | $ | 1,054 | $ | 7,904 | $ | 8,958 | $ | 56 | $ | 9,014 | ||||||||||
Lease liabilities - long-term | 6,408 | 42,644 | 49,052 | 86 | 49,138 | |||||||||||||||
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Total Lease Liabilities | $ | 7,462 | $ | 50,548 | $ | 58,010 | $ | 142 | $ | 58,152 | ||||||||||
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| Related Party | Other | Total | Finance Leases | Total | ||||||||||||||||
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2021 (July-Dec) | $ | 1,461 | $ | 11,009 | $ | 12,470 | $ | 65 | $ | 12,535 | ||||||||||
2022 | 1,470 | 10,874 | 12,344 | 51 | 12,395 | |||||||||||||||
2023 | 1,017 | 8,817 | 9,834 | 25 | 9,859 | |||||||||||||||
2024 | 1,021 | 6,890 | 7,911 | 10 | 7,921 | |||||||||||||||
2025 | 1,037 | 5,937 | 6,974 | 1 | 6,975 | |||||||||||||||
Thereafter | 3,545 | 22,222 | 25,767 | 0 | 25,767 | |||||||||||||||
Undiscounted Cash Flows | $ | 9,551 | $ | 65,749 | $ | 75,300 | $ | 152 | $ | 75,452 | ||||||||||
Less: imputed interest | (3,020 | ) | (19,463 | ) | (22,483 | ) | (11 | ) | (22,494 | ) | ||||||||||
Total | $ | 6,531 | $ | 46,286 | $ | 52,817 | $ | 141 | $ | 52,958 | ||||||||||
Reconciliation to lease liabilities: | ||||||||||||||||||||
Lease liabilities—current | $ | 954 | $ | 7,814 | $ | 8,768 | $ | 59 | $ | 8,827 | ||||||||||
Lease liabilities—long-term | 5,577 | 38,472 | 44,049 | 82 | 44,131 | |||||||||||||||
Total Lease Liabilities | $ | 6,531 | $ | 46,286 | $ | 52,817 | $ | 141 | $ | 52,958 | ||||||||||
We performed an interim review There were 0 indications of broadcast licensesimpairment during the three months ended March 31, 2020 due to the COVID-19 pandemicthree- and the resulting stay-at-home orders that began to adversely impact revenues. Based on our assessment, we engaged Bond & Pecaro, an independent third-party appraisal and valuation firm, to assist us with determining the enterprise value of 11 of our market clusters. During the three months ended September 30, 2020 we performed an additional interim review of broadcast license for impairment due to industry forecasts showing that revenue was improving at a lower rate than originally expected. While we believe that revenue will recover from the rapid revenue decline due to the COVID-19 pandemic, the recovery will be longer than expected due to extended and reinstated stay-at-home orders that unfavorably impact the economy. We retested 11 of our market clusters based on the lower margin between the recent fair value estimate and the carrying value. The results of our interim impairment reviews are shown below.
Impairment testing requires estimates of the fair value of our indefinite-lived intangible assets. We believe that these fair value estimates are critical accounting estimates as the value is significant in relation to our total assets and the estimates incorporate variables and assumptions based on our experiences and judgment about our future operating performance. Fair value measurements use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value, including assumptions about risk. If actual future results are less favorable than the assumptions and estimates used in our estimates, we are subject to future impairment charges, the amount of which may be material. The unobservable inputs are defined in FASB ASC Topic 820 “Fair Value Measurements and Disclosures” as Level 3 inputs discussed in detail in Note 14 – Fair Value Measurements.
The estimated fair value of each market cluster was determined using the Greenfield Method, a form of the income approach. The premise of the Greenfield Method is that the value of a broadcast license is equivalent to a hypothetical start-up in which the only asset owned by the station as of the valuation date is the broadcast license. This approach eliminates factors that are unique to our operation of the station, including its format and historical financial performance. The method then assumes the entity has to purchase, build, or rent all of the other assets needed to operate a comparable station to the one in which the broadcast license is being utilized as of the valuation date. Cash flows are estimated and netted against all start-up costs, expenses and investments necessary to achieve a normalized and mature state of operations, thus reflecting only the cash flows directly attributable to the broadcast license. A multi-year discounted cash flow approach is then used to determine the net present value of these cash flows to derive an indication of fair value. For cash flows beyond the projection period, a terminal value is calculated using the Gordon constant growth model and long-term industry growth rate assumptions based on long-term industry growth and Gross Domestic Product (“GDP”) inflation rates.
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The primary assumptions used in the Greenfield Method are:
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The assumptions used reflect those of a hypothetical market participant and not necessarily the actual or projected results of Salem. The key estimates and assumptions used in the start-up income valuation for the broadcast licenses subject to testing were as follows:
Broadcast Licenses | December 31, 2019 | March 31, 2020 | September 30, 2020 | |||
Risk-adjusted discount rate | 9.0% | 9.5% | 8.5% | |||
Operating profit margin ranges | 4.0% - 33.8% | 4.6% - 33.8% | 4.3% - 33.3% | |||
Long-term revenue growth rates | 0.7% - 1.1% | 0.8% - 1.1% | 0.2% - 1.1% |
The risk-adjusted discount rate reflects the Weighted Average Cost of Capital (“WACC”) developed based on data from same or similar industry participants and publicly available market data as of the measurement date.
Based on our review and analysis, we determined that the carrying value of broadcast licenses in 7 of our market clusters were impaired as of the interim testing period ended March 31, 2020. We recorded an impairment charge of $17.0 million to the value of broadcast licenses in Chicago, Cleveland, Louisville, Philadelphia, Portland, Sacramento and Tampa as of the interim testing period ended March 31, 2020. The impairment charges were driven by decreases in projected revenues due to the current estimated impact of COVID-19 and an increase in the WACC. We believe that these factors are indicative of trends in the industry as a whole and not unique to our company or operations. There were no impairment charges recorded during the three months ended SeptemberJune 30, 2020.
The table below presents the results of our interim impairment testing under the start-up income approach at March 31, 2020 and September 30, 2020:
Market Cluster | Excess Fair Value | Excess Fair Value | ||||||
Boston, MA | 4.8 | % | 5.6 | % | ||||
Chicago, IL | (9.0 | %) | 8.5 | % | ||||
Cleveland, OH | (18.4 | %) | 6.5 | % | ||||
Dallas, TX | 8.5 | % | 11.8 | % | ||||
Louisville, KY | (21.8 | %) | 13.8 | % | ||||
New York, NY | 7.3 | % | 15.9 | % | ||||
Philadelphia, PA | (13.1 | %) | 5.1 | % | ||||
Portland, OR | (14.8 | %) | 10.1 | % | ||||
Sacramento, CA | (9.6 | %) | 4.6 | % | ||||
San Francisco, CA | 1.2 | % | 7.0 | % | ||||
Tampa, FL | (28.0 | %) | 20.5 | % | ||||
We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our broadcast licenses, however, these estimates and assumptions are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. Due to the continued impact of the COVID-19 pandemic we will continue to evaluate broadcast licenses for impairment and further assess if an impairment triggering event has occurred. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of our broadcast licenses below the amounts reflected on our balance sheet, we may recognize future impairment charges, the amount of which may be material.
23
The following table presents the changes in broadcasting licenses that include acquisitions and divestitures of radio stations and FM translators.
Broadcast Licenses | Twelve Months Ended December 31, 2019 | Nine Months Ended September 30, 2020 | ||||||
| (Dollars in thousands) | ||||||||
Balance before cumulative loss on impairment, beginning of period | $ | 484,691 | $ | 441,143 | ||||
Accumulated loss on impairment, beginning of period | (108,375 | ) | (103,285 | ) | ||||
|
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| |||||
Balance after cumulative loss on impairment, beginning of period | 376,316 | 337,858 | ||||||
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| |||||
Acquisitions of radio stations | 617 | — | ||||||
Acquisitions of FM translators and construction permits | 35 | — | ||||||
Capital projects | 300 | — | ||||||
Dispositions of radio stations | (36,502 | ) | (1,091 | ) | ||||
Impairments based on the estimated fair value of broadcast licenses | (2,908 | ) | (16,994 | ) | ||||
|
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|
| |||||
Balance, end of period after cumulative loss on impairment | $ | 337,858 | $ | 319,773 | ||||
|
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| |||||
Balance, end of period before cumulative loss on impairment | $ | 441,143 | $ | 440,052 | ||||
Accumulated loss on impairment, end of period | (103,285 | ) | (120,279 | ) | ||||
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| |||||
Balance, end of period after cumulative loss on impairment | $ | 337,858 | $ | 319,773 | ||||
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| |||||
Broadcast Licenses | Twelve Months Ended December 31, 2020 | Six Months Ended June 30, 2021 | ||||||
(Dollars in thousands) | ||||||||
Balance before cumulative loss on impairment, beginning of period | $ | 435,300 | $ | 434,209 | ||||
Accumulated loss on impairment, beginning of period | (97,442 | ) | (114,436 | ) | ||||
Balance after cumulative loss on impairment, beginning of period | 337,858 | 319,773 | ||||||
Acquisitions of radio stations | — | 235 | ||||||
Dispositions of radio stations | (1,091 | ) | — | |||||
Impairments based on the estimated fair value of broadcast licenses | (16,994 | ) | — | |||||
Balance, end of period after cumulative loss on impairment | $ | 319,773 | $ | 320,008 | ||||
Balance, end of period before cumulative loss on impairment | $ | 434,209 | $ | 434,444 | ||||
Accumulated loss on impairment, end of period | (114,436 | ) | (114,436 | ) | ||||
Balance, end of period after cumulative loss on impairment | $ | 319,773 | $ | 320,008 | ||||
We performed an interim review of goodwill during the three months ended March 31, 2020 due to the COVID-19 pandemic and the resulting stay-at-home orders that began to adversely impact revenues. We assessed a variety of factors, including media industry forecasts and the amount by which the prior estimated fair value exceeded the carrying value including goodwill. The results of our interim impairment analysis are described further below.
We re-evaluated these factors as of the interim period ending September 30, 2020 to determine if it was more likely than not that assets are impaired. We concluded that there are no There were 0 indications of impairment mainly because of the difference between the most recent fair value estimates and the carrying value.
Impairment testing requires estimates of the fair value of our indefinite-lived intangible assets. We believe that these fair value estimates are critical accounting estimates as the value is significant in relation to our total assets and the estimates incorporate variables and assumptions based on our experiences and judgment about our future operating performance. Fair value measurements use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value, including assumptions about risk. If actual future results are less favorable than the assumptions and estimates used in our estimates, we are subject to future impairment charges, the amount of which may be material. The unobservable inputs are defined in FASB ASC Topic 820 “Fair Value Measurements and Disclosures” as Level 3 inputs discussed in detail in Note 14 – Fair Value Measurements.
For the interim testing performed during the three months ended March 31, 2020, we engaged Bond & Pecaro, an independent appraisalthree- and valuation firm, to assist us in estimating the enterprise of value Salem Author Services for the purpose of evaluating if goodwill is impaired. The enterprise valuation assumes that the subject assets are installed as part of an operating business rather than as a hypothetical start-up. The key estimates and assumptions used for our enterprise valuations for the reporting units subject to testing are as follows:
Publishing Enterprise Valuations | December 31, 2019 | March 31, 2020 | ||
Risk adjusted discount rate | 10.0% | 10.5% | ||
Operating margin ranges | 1.5% – 3.9% | 0.0% – 3.9% | ||
Long-term revenue growth rates | 0.5% | 0.5% |
The risk-adjusted discount rate reflects the WACC developed based on data from same or similar industry participants and publicly available market data as of the measurement date.
Based on our review and analysis, we recorded an impairment charge of $0.3 million, including a $0.1 million charge to the carrying value of goodwill associated with Salem Author Services as of the interim testing
We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of goodwill, however, these estimates and assumptions are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. Due to the continued impact of the COVID-19 pandemic we will continue to evaluate goodwill for impairment and
24
further assess if an impairment triggering event has occurred. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of goodwill below the amounts reflected on our balance sheet, we may recognize future impairment charges, the amount of which may be material.
The following table presents the changes in goodwill including business acquisitions and dispositions as discussed in Note 3 of our Condensed Consolidated Financial Statements.
Goodwill | Twelve Months Ended December 31, 2019 | Nine Months Ended September 30, 2020 | ||||||
| (Dollars in thousands) | ||||||||
Balance, beginning of period before cumulative loss on impairment, | $ | 28,818 | $ | 28,454 | ||||
Accumulated loss on impairment | (2,029 | ) | (4,456 | ) | ||||
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|
| |||||
Balance, beginning of period after cumulative loss on impairment | 26,789 | 23,998 | ||||||
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| |||||
Acquisitions of radio stations | — | — | ||||||
Acquisitions of digital media entities | 6 | 66 | ||||||
Disposition of radio stations | (29 | ) | — | |||||
Disposition of digital media entities | (341 | ) | — | |||||
Impairments based on the estimated fair value goodwill | (2,427 | ) | (307 | ) | ||||
|
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| |||||
Ending period balance | $ | 23,998 | $ | 23,757 | ||||
|
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| |||||
Balance, end of period before cumulative loss on impairment | 28,454 | 28,520 | ||||||
Accumulated loss on impairment | (4,456 | ) | (4,763 | ) | ||||
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| |||||
Ending period balance | $ | 23,998 | $ | 23,757 | ||||
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NOTE 11. OTHER INDEFINITE-LIVED INTANGIBLE ASSETS
Other indefinite-lived intangible assets consist of mastheads, or the graphic elements that identify our publications to readers and advertisers. These include customized typeset page headers, section headers, and column graphics as well as other name and identity stylized elements within the body of each publication. We are not aware of any legal, competitive, economic or other factors that materially limit the useful life of our mastheads. We account for mastheads in accordance with FASB ASC Topic 350 Intangibles—Goodwill and Other. We do not amortize mastheads, but rather test for impairment annually or more frequently if events or circumstances indicate that an asset may be impaired.
We performed an interim review of mastheads during the three months ended March 31, 2020 due to the COVID-19 pandemic and the resulting stay-at-home orders that began to adversely impact revenues. We assessed a variety of factors, including media industry forecasts and the amount by which the prior estimated fair value exceeded the carrying value. The results of our interim impairment analysis are described further below.
Impairment testing requires estimates of the fair value of our indefinite-lived intangible assets. We believe that these fair value estimates are critical accounting estimates as the value is significant in relation to our total assets and the estimates incorporate variables and assumptions based on our experiences and judgment about our future operating performance. Fair value measurements use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value, including assumptions about risk. If actual future results are less favorable than the assumptions and estimates used in our estimates, we are subject to future impairment charges, the amount of which may be material. The unobservable inputs are defined in FASB ASC Topic 820 “Fair Value Measurements and Disclosures” as Level 3 inputs discussed in detail in Note 14 – Fair Value Measurements.
For the interim testing, we engaged Bond & Pecaro, an independent appraisal and valuation firm, to assist us in estimating the fair value of mastheads using a Relief from Royalty method, a form of the income approach. The Relief from Royalty method estimates the fair value of mastheads through use of a discounted cash flow model that incorporates a hypothetical “royalty rate” that a third-party owner would be willing to pay in lieu of owning the asset. The royalty rate is based on observed royalty rates for comparable assets as of the measurement date. We adjust the selected royalty rate to account for a percentage of the royalty fee that could be attributed to the use of other intangibles, such as goodwill, time in existence, trade secrets and industry expertise. The adjusted royalty rate represents the royalty fee remaining that could be attributed to the use of the masthead only.
Pre-tax royalty income is based on a 10-year revenue forecast and assumed to carry on into perpetuity. Revenue beyond the projection period (terminal year) is based on estimated long-term industry growth rates. The analysis also incorporates the present value of the tax amortization benefit associated with mastheads. The key estimates and assumptions are as follows:
Mastheads | December 31, 2019 | March 31, 2020 | ||||||
Risk-adjusted discount rate | 10.0 | % | 10.5 | % | ||||
Long-term revenue growth rates | (4.0%) – (1.0%) | (1.0%) - (25.0%) | ||||||
Royalty rate | 3.00 | % | 3.00 | % | ||||
The risk-adjusted discount rate reflects the WACC developed based on data from same or similar industry participants and publicly available market data as of the measurement date.
25
Goodwill | Twelve Months Ended December 31, 2020 | Six Months Ended June 30, 2021 | ||||||
(Dollars in thousands) | ||||||||
Balance, beginning of period before cumulative loss on impairment, | $ | 28,454 | $ | 28,520 | ||||
Accumulated loss on impairment | (4,456 | ) | (4,763 | ) | ||||
Balance, beginning of period after cumulative loss on impairment | 23,998 | 23,757 | ||||||
Acquisitions of radio stations | 66 | 4 | ||||||
Acquisitions of digital media entities | — | 24 | ||||||
Impairments based on the estimated fair value goodwill | (307 | ) | — | |||||
Ending period balance | $ | 23,757 | $ | 23,785 | ||||
Balance, end of period before cumulative loss on impairment | 28,520 | 28,548 | ||||||
Accumulated loss on impairment | (4,763 | ) | (4,763 | ) | ||||
Ending period balance | $ | 23,757 | $ | 23,785 | ||||
Based on our review and analysis, we recorded an impairment charge to mastheads of $0.3 million as of the interim testing period ended March 31, 2020. The impairment charge was driven by decreases in the projected long-term revenue growth rates for the print magazine industry and an increase in the WACC. We believe that these factors are indicative of trends in the industry as a whole and not unique to our company or operations. The impairment charge during the three months ended March 31, 2020 reduced the value of our mastheads to zero eliminating subsequent testing.
| As of September 30, 2020 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
| (Dollars in thousands) | ||||||||||||
Customer lists and contracts | $ | 24,012 | $ | (22,371 | ) | $ | 1,641 | |||||
Domain and brand names | 20,350 | (18,806 | ) | 1,544 | ||||||||
Favorable and assigned leases | 2,188 | (1,939 | ) | 249 | ||||||||
Subscriber base and lists | 9,886 | (8,863 | ) | 1,023 | ||||||||
Author relationships | 2,771 | (2,726 | ) | 45 | ||||||||
Non-compete agreements | 2,041 | (1,917 | ) | 124 | ||||||||
Other amortizable intangible assets | 1,666 | (1,573 | ) | 93 | ||||||||
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| |||||||
| $ | 62,914 | $ | (58,195 | ) | $ | 4,719 | ||||||
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| As of December 31, 2019 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
| (Dollars in thousands) | ||||||||||||
Customer lists and contracts | $ | 23,833 | $ | (21,823 | ) | $ | 2,010 | |||||
Domain and brand names | 20,332 | (17,727 | ) | 2,605 | ||||||||
Favorable and assigned leases | 2,188 | (1,920 | ) | 268 | ||||||||
Subscriber base and lists | 9,886 | (8,251 | ) | 1,635 | ||||||||
Author relationships | 2,771 | (2,609 | ) | 162 | ||||||||
Non-compete agreements | 2,041 | (1,798 | ) | 243 | ||||||||
Other amortizable intangible assets | 1,666 | (1,489 | ) | 177 | ||||||||
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| |||||||
| $62,717 | $(55,617) | $7,100 | ||||||||||
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June 30, 2021 | ||||||||||||
| Cost | Accumulated Amortization | Net | ||||||||||
(Dollars in thousands) | ||||||||||||
Customer lists and contracts | $ | 23,225 | $ | (21,770 | ) | $ | 1,455 | |||||
Domain and brand names | 20,289 | (19,492 | ) | 797 | ||||||||
Favorable and assigned leases | 2,188 | (1,951 | ) | 237 | ||||||||
Subscriber base and lists | 9,522 | (8,809 | ) | 713 | ||||||||
Author relationships | 2,771 | (2,770 | ) | 1 | ||||||||
Non-compete agreements | 2,041 | (2,028 | ) | 13 | ||||||||
Other amortizable intangible assets | 1,666 | (1,656 | ) | 10 | ||||||||
$ | 61,702 | $ | (58,476 | ) | $ | 3,226 | ||||||
December 31, 2020 | ||||||||||||
| Accumulated | ||||||||||||
| Cost | Amortization | Net | ||||||||||
(Dollars in thousands) | ||||||||||||
Customer lists and contracts | $ | 24,012 | $ | (22,533 | ) | $ | 1,479 | |||||
Domain and brand names | 20,350 | (19,127 | ) | 1,223 | ||||||||
Favorable and assigned leases | 2,188 | (1,943 | ) | 245 | ||||||||
Subscriber base and lists | 9,886 | (8,974 | ) | 912 | ||||||||
Author relationships | 2,771 | (2,765 | ) | 6 | ||||||||
Non-compete agreements | 2,041 | (1,954 | ) | 87 | ||||||||
Other amortizable intangible assets | 1,666 | (1,601 | ) | 65 | ||||||||
| $62,914 | $(58,897) | $4,017 | ||||||||||
Year Ended December 31, | Amortization Expense | |||
| (Dollars in thousands) | ||||
2020 (Oct – Dec) | $ | 702 | ||
2021 | 1,846 | |||
2022 | 1,209 | |||
2023 | 675 | |||
2024 | 82 | |||
Thereafter | 205 | |||
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Total | $ | 4,719 | ||
|
| |||
Year Ended December 31, | Amortization Expense | |||
(Dollars in thousands) | ||||
2021 (July – Dec) | $ | 796 | ||
2022 | 1,318 | |||
2023 | 784 | |||
2024 | 117 | |||
2025 | 13 | |||
Thereafter | 198 | |||
Total | $ | 3,226 | ||
26
The indenture relating to the Notes (the “Indenture”) contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets.
Date | Principal Repurchased | Cash Paid | % of Face Value | Bond Issue Costs | Net Gain | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
January 30, 2020 | $ | 2,250 | $ | 2,194 | 97.50 | % | $ | 34 | $ | 22 | ||||||||||
January 27, 2020 | 1,245 | 1,198 | 96.25 | % | 20 | 27 | ||||||||||||||
December 27, 2019 | 3,090 | 2,874 | 93.00 | % | 49 | 167 | ||||||||||||||
November 27, 2019 | 5,183 | 4,548 | 87.75 | % | 82 | 553 | ||||||||||||||
November 15, 2019 | 3,791 | 3,206 | 84.58 | % | 61 | 524 | ||||||||||||||
March 28, 2019 | 2,000 | 1,830 | 91.50 | % | 36 | 134 | ||||||||||||||
March 28, 2019 | 2,300 | 2,125 | 92.38 | % | 42 | 133 | ||||||||||||||
February 20, 2019 | 125 | 114 | 91.25 | % | 2 | 9 | ||||||||||||||
February 19, 2019 | 350 | 319 | 91.25 | % | 7 | 24 | ||||||||||||||
February 12, 2019 | 1,325 | 1,209 | 91.25 | % | 25 | 91 | ||||||||||||||
January 10, 2019 | 570 | 526 | 92.25 | % | 9 | 35 | ||||||||||||||
December 21, 2018 | 2,000 | 1,835 | 91.75 | % | 38 | 127 | ||||||||||||||
December 21, 2018 | 1,850 | 1,702 | 92.00 | % | 35 | 113 | ||||||||||||||
December 21, 2018 | 1,080 | 999 | 92.50 | % | 21 | 60 | ||||||||||||||
November 17, 2018 | 1,500 | 1,357 | 90.50 | % | 29 | 114 | ||||||||||||||
May 4, 2018 | 4,000 | 3,770 | 94.25 | % | 86 | 144 | ||||||||||||||
April 10, 2018 | 4,000 | 3,850 | 96.25 | % | 87 | 63 | ||||||||||||||
April 9, 2018 | 2,000 | 1,930 | 96.50 | % | 43 | 27 | ||||||||||||||
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| $ | 38,659 | $ | 35,586 | $ | 706 | $ | 2,367 | |||||||||||||
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27
Date | Principal Repurchased | Cash Paid | % of Face Value | Bond Issue Costs | Net Gain | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
January 30, 2020 | $ | 2,250 | $ | 2,194 | 97.50 | % | $ | 34 | $ | 22 | ||||||||||
January 27, 2020 | 1,245 | 1,198 | 96.25 | % | 20 | 27 | ||||||||||||||
December 27, 2019 | 3,090 | 2,874 | 93.00 | % | 48 | 167 | ||||||||||||||
November 27, 2019 | 5,183 | 4,548 | 87.75 | % | 82 | 553 | ||||||||||||||
November 15, 2019 | 3,791 | 3,206 | 84.58 | % | 61 | 524 | ||||||||||||||
March 28, 2019 | 2,000 | 1,830 | 91.50 | % | 37 | 134 | ||||||||||||||
March 28, 2019 | 2,300 | 2,125 | 92.38 | % | 42 | 133 | ||||||||||||||
February 20, 2019 | 125 | 114 | 91.25 | % | 2 | 9 | ||||||||||||||
February 19, 2019 | 350 | 319 | 91.25 | % | 7 | 24 | ||||||||||||||
February 12, 2019 | 1,325 | 1,209 | 91.25 | % | 25 | 91 | ||||||||||||||
January 10, 2019 | 570 | 526 | 92.25 | % | 9 | 35 | ||||||||||||||
December 21, 2018 | 2,000 | 1,835 | 91.75 | % | 38 | 127 | ||||||||||||||
December 21, 2018 | 1,850 | 1,702 | 92.00 | % | 35 | 113 | ||||||||||||||
December 21, 2018 | 1,080 | 999 | 92.50 | % | 21 | 60 | ||||||||||||||
November 17, 2018 | 1,500 | 1,357 | 90.50 | % | 29 | 114 | ||||||||||||||
May 4, 2018 | 4,000 | 3,770 | 94.25 | % | 86 | 144 | ||||||||||||||
April 10, 2018 | 4,000 | 3,850 | 96.25 | % | 87 | 63 | ||||||||||||||
April 9, 2018 | 2,000 | 1,930 | 96.50 | % | 43 | 27 | ||||||||||||||
| $ | 38,659 | $ | 35,586 | $ | 706 | $ | 2,367 | |||||||||||||
We amended
6.75% Senior Secured Notes Less unamortized debt issuance costs based on imputed interest rate of 7.08% 6.75% Senior Secured Notes net carrying value Asset-Based Revolving Credit Facility principal outstanding Long-term debt less unamortized debt issuance costs Less current portion Long-term debt less unamortized debt issuance costs, net of current portion 2021 2022 2023 2024 2025 Thereafter As of
December 31, 2019 As of
September 30, 2020 (Dollars in thousands) $ 219,836 $ 216,341 (3,368 ) (2,761 ) 216,468 213,580 12,426 16,600 $ 228,894 $ 230,180 (12,426 ) (16,600 ) $ 216,468 $ 213,580 December 31, 2020 $ 216,341 (2,577 ) 213,764 5,000 — — $ 218,764 (5,000 ) — $ 213,764 SeptemberJune 30, 2020:2021:$16.6 million under the ABL Facility, with interest spread ranging from Base Rate plus 0.50% to 1.00% for base rate borrowings and LIBOR plus 1.50% to 2.00% for LIBOR borrowings;SeptemberJune 30, 20202021 for each of the next five years and thereafter are as follows: Amount For the Year Ended September 30, (Dollars in thousands) $ 16,600 — — 216,341 — — $ 232,941 $ 0 0 216,341 0 11,195 0 $ 227,536 14.12. FAIR VALUE MEASUREMENTS•Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;•Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and•Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).29
As of SeptemberJune 30, 2020,2021, the carrying value of cash and cash equivalents, trade accounts receivables, accounts payable, accrued expenses and accrued interest approximates fair value due to the short-term nature of such instruments. The carrying amount of the Notes at SeptemberJune 30, 20202021 was $216.3 million compared to the estimated fair value of $189.3$210.9 million, based on the prevailing interest rates and trading activity of our Notes.
| September 30, 2020 | ||||||||||||||||
| Carrying Value on Balance Sheet | Fair Value Measurement Category | |||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Estimated fair value of other indefinite-lived intangible assets | $ | — | — | — | $ | — | ||||||||||
Liabilities: | ||||||||||||||||
Estimated fair value of contingent earn-out consideration included in accrued expenses | 7 | — | — | 7 | ||||||||||||
Long-term debt less unamortized debt issuance costs | 230,180 | — | 201,408 | — | ||||||||||||
June 30, 2021 | ||||||||||||||||
| Carrying Value on Balance Sheet | Fair Value Measurement Category | |||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Liabilities: | ||||||||||||||||
Estimated fair value of contingent earn-out consideration included in accrued expenses | $ | 11 | — | — | $ | 11 | ||||||||||
Long-term debt less unamortized debt issuance costs | 225,327 | — | 208,779 | — | ||||||||||||
changes to the deferred tax liability for amortization of indefinite-lived intangible assets.
At December 31, 2019, we had net operating loss carryforwards for federal income
As a result of our adjusted cumulative three-year pre-tax book loss as of September 30, 2020, we performed quarterly assessments of positive and negative evidence with respect to the realization of our net deferred tax assets. This assessment includes the evaluation of scheduled reversals of deferred tax liabilities, the availability of carryforwards, and estimates$19.7 million of projected future taxable income. The economic uncertainty from theCOVID-19 pandemic provided additional negative evidence that outweighed positive evidence resulting in our conclusion that additional deferred tax assets of $36.8 million related to federal and state net operating loss carryforwards are more likely than not to be not realized. As such, an additional valuation allowance of $37.1$15.7 million was recorded in the period ended March 31, 2020, which was reduced by $0.3and other financial statement accrual assets of $4.0 million, in the period ended June 30, 2020, for a total valuation allowance of $49.8$48.1 million for the periodyear ended September 30, 2020.
We recognized a tax provision from income taxes of $0.4 million for the three- month period ended September 30, 2020 compared to a tax provision of $1.1 million for the same period of the prior year. For the nine-month period ended September 30, 2020, we recognized a tax provision of $31.2 million compared to a tax provision of $0.7 million for the same period of the prior year. The provision for (benefit from) income taxes as a percentage of income before income taxes, or the effective tax rate, was 54.9% for the three-month period ended September 30, 2020 compared to (5.9)% for the same period of the prior year. The provision for (benefit from) income taxes as a percentage of income before income taxes, or the effective tax rate was (119.0)% for the nine-month period ended September 30, 2020 compared to 3.1% for the same period of the prior year. The effective tax rate for each period differs from the federal statutory income rate of 21.0% due to the effect of the sale of business assets in various states, state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance. The effective tax rate of (119.0%) is driven by increases in the valuation allowance of $24.5 million recorded against federal deferred tax assets relating to federal net operating loss carryforwards and $12.3 million of additional valuation allowance relating to state net operating loss carryforwards.
30
We recorded an out-of-period adjustment of $1.5 million as of June 30, 2020 due to a change in our annual effective tax rate which should have been recorded in the quarter ended MarchDecember 31, 2020. In evaluating the adjustment, we referred to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 99, including SAB Topic 1.M, which provides guidance on the assessment
The company enters
The company also records
The company
31
We recognizethreethree- and nine monthsSeptemberJune 30, 20202021 and 2019:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
Stock option compensation expense included in unallocated corporate expenses | $ | 43 | $ | 30 | $ | 229 | $ | 122 | ||||||||
Restricted stock shares compensation expense included in unallocated corporate expenses | 100 | — | 523 | — | ||||||||||||
Stock option compensation expense included in broadcast operating expenses | 20 | 32 | 88 | 106 | ||||||||||||
Restricted stock shares compensation expense included in broadcast operating expenses | — | — | 383 | — | ||||||||||||
Stock option compensation expense included in digital media operating expenses | 12 | 12 | 58 | 44 | ||||||||||||
Stock option compensation expense included in publishing operating expenses | 2 | — | 8 | 1 | ||||||||||||
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Total stock-based compensation expense, pre-tax | $ | 177 | $ | 74 | $ | 1,289 | $ | 273 | ||||||||
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Tax expense for stock-based compensation expense | (46 | ) | (19 | ) | (335 | ) | (71 | ) | ||||||||
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Total stock-based compensation expense, net of tax | $ | 131 | $ | 55 | $ | 954 | $ | 202 | ||||||||
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2020:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||
Stock option compensation expense included in unallocated corporate expenses | $ | 43 | $ | 24 | $ | 93 | $ | 52 | ||||||||
Stock option compensation expense included in broadcast operating expenses | 37 | 33 | 74 | 61 | ||||||||||||
Stock option compensation expense included in digital media operating expenses | 16 | 27 | 31 | 49 | ||||||||||||
Stock option compensation expense included in publishing operating expenses | — | — | 1 | — | ||||||||||||
Total stock-based compensation expense, pre-tax | $ | 96 | $ | 84 | $ | 199 | $ | 162 | ||||||||
Tax expense for stock-based compensation expense | (25 | ) | (22 | ) | (52 | ) | (42 | ) | ||||||||
Total stock-based compensation expense, net of tax | $ | 71 | $ | 62 | $ | 147 | $ | 120 | ||||||||
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2019 | September 30, 2019 | September 30, 2020 | September 30, 2020 | |||||||||||||
Expected volatility | 50.45 | % | 50.07 | % | n/a | 53.96 | % | |||||||||
Expected dividends | 15.75 | % | 14.91 | % | n/a | 7.30 | % | |||||||||
Expected term (in years) | 7.7 | 7.7 | n/a | 7.6 | ||||||||||||
Risk-free interest rate | 1.71 | % | 1.83 | % | n/a | 1.14 | % | |||||||||
32
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||
June 30, 2020 | June 30, 2020 | June 30, 2021 | June 30, 2021 | |||||||||
Expected volatility | n/a | 53.96 | % | n/a | 74.83 | % | ||||||
Expected dividends | n/a | 7.30 | % | n/a | 0.00 | % | ||||||
Expected term (in years) | n/a | 7.6 | n/a | 7.7 | ||||||||
Risk-free interest rate | n/a | 1.14 | % | n/a | 0.96 | % | ||||||
Activity with respect to the company’s option awards during the nine months
Options | Shares | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||
| (Dollars in thousands, except weighted average exercise price and weighted average grant date fair value) | ||||||||||||||||||||
Outstanding at January 1, 2020 | 1,860,722 | $ | 4.39 | $ | 2.37 | 3.6 years | $ | — | ||||||||||||
Granted | 743,000 | 1.37 | 0.35 | — | ||||||||||||||||
Exercised | — | — | — | — | ||||||||||||||||
Forfeited or expired | (293,425 | ) | 5.67 | 3.85 | $ | — | ||||||||||||||
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Outstanding at September 30, 2020 | 2,310,270 | $ | 3.26 | $ | 1.53 | 4.5 years | $ | — | ||||||||||||
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Exercisable at September 30, 2020 | 1,199,020 | $ | 4.52 | $ | 2.30 | 2.5 years | $ | — | ||||||||||||
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Expected to Vest | 1,055,132 | $ | 3.29 | $ | 1.55 | 4.5 years | $ | — | ||||||||||||
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Options | Shares | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||
(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value) | ||||||||||||||||||||
Outstanding at January 1, 2021 | 2,291,020 | $ | 3.23 | $ | 1.52 | 4.3 years | $ | — | ||||||||||||
Granted | 210,000 | 2.01 | 1.44 | — | ||||||||||||||||
Exercised | (185,782 | ) | 2.11 | 0.97 | 188 | |||||||||||||||
Forfeited or expired | (157,446 | ) | 6.73 | 4.74 | — | |||||||||||||||
Outstanding at June 30, 2021 | 2,157,792 | $ | 2.95 | $ | 1.33 | 4.5 years | $ | 996 | ||||||||||||
Exercisable at June 30, 2021 | 1,210,417 | $ | 3.84 | $ | 1.75 | 2.8 years | $ | 167 | ||||||||||||
Expected to Vest | 899,533 | $ | 2.98 | $ | 1.34 | 4.5 years | $ | 786 | ||||||||||||
Restricted Stock Awards | Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
| (Dollars in thousands, except weighted average exercise price and weighted average grant date fair value) | ||||||||||||||||
Outstanding at January 1, 2020 | 107,990 | $ | 1.85 | 1.67 years | $ | 156 | ||||||||||
Granted | — | — | — | — | ||||||||||||
Lapsed | — | — | — | — | ||||||||||||
Forfeited | — | — | — | — | ||||||||||||
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Outstanding at September 30, 2020 | 107,990 | $ | 1.85 | 0.92 years | $ | 99 | ||||||||||
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Restricted Stock Awards | Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value) | ||||||||||||||||
Outstanding at January 1, 2021 | 107,990 | $ | 1.85 | 1.67 years | $ | 112 | ||||||||||
Granted | — | — | — | — | ||||||||||||
Lapsed | — | — | — | — | ||||||||||||
Forfeited | — | — | — | — | ||||||||||||
Outstanding at June 30, 2021 | 107,990 | $ | 1.85 | 0.6 years | $ | 275 | ||||||||||
The following table shows distributions that have been declared and paid since January 1, 2019:
Announcement Date | Payment Date | Amount Per Share | Cash Distributed (in thousands) | |||||||
March 10, 2020 | March 31, 2020 | $ | 0.0250 | $ | 667 | |||||
December 10, 2019 | December 30, 2019 | $ | 0.0250 | 667 | ||||||
September 11, 2019 | September 30, 2019 | $ | 0.0650 | 1,730 | ||||||
May 14, 2019 | June 28, 2019 | $ | 0.0650 | 1,728 | ||||||
March 7, 2019 | March 29, 2019 | $ | 0.0650 | 1,702 | ||||||
33
Segment performance, as defined by Salem, is not necessarily comparable to other similarly titled captions of other companies.
Broadcast
.
34
| Broadcast | Digital Media | Publishing | Unallocated Corporate Expenses | Consolidated | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Three Months Ended September 30, 2020 | ||||||||||||||||||||
Net revenue | $ | 45,391 | $ | 9,808 | $ | 5,442 | $ | — | $ | 60,641 | ||||||||||
Operating expenses | 34,283 | 7,144 | 5,814 | 3,849 | 51,090 | |||||||||||||||
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Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the disposition of assets | $ | 11,108 | $ | 2,664 | $ | (372 | ) | $ | (3,849 | ) | $ | 9,551 | ||||||||
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Depreciation | 1,626 | 746 | 70 | 235 | 2,677 | |||||||||||||||
Amortization | 4 | 537 | 210 | — | 751 | |||||||||||||||
Change in the estimated fair value of contingent earn-out consideration | — | (10 | ) | — | — | (10 | ) | |||||||||||||
Net (gain) loss on the disposition of assets | 1,380 | — | 1 | — | 1,381 | |||||||||||||||
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Net operating income (loss) | $ | 8,098 | $ | 1,391 | $ | (653 | ) | $ | (4,084 | ) | $ | 4,752 | ||||||||
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Three Months Ended September 30, 2019 | ||||||||||||||||||||
Net revenue | $ | 47,679 | $ | 9,149 | $ | 7,288 | $ | — | $ | 64,116 | ||||||||||
Operating expenses | 37,310 | 7,282 | 6,517 | 4,183 | 55,292 | |||||||||||||||
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Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the disposition of assets | $ | 10,369 | $ | 1,867 | $ | 771 | $ | (4,183 | ) | $ | 8,824 | |||||||||
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Depreciation | 1,720 | 764 | 80 | 180 | 2,744 | |||||||||||||||
Amortization | 8 | 929 | 210 | — | 1,147 | |||||||||||||||
Change in the estimated fair value of contingent earn-out consideration | — | (40 | ) | — | — | (40 | ) | |||||||||||||
Impairment of indefinite-lived long-term assets other than goodwill | 1,915 | — | — | — | 1,915 | |||||||||||||||
Net (gain) loss on the disposition of assets | 17,539 | 6 | — | — | 17,545 | |||||||||||||||
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Net operating income (loss) | $ | (10,813 | ) | $ | 208 | $ | 481 | $ | (4,363 | ) | $ | (14,487 | ) | |||||||
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| Broadcast | Digital Media | Publishing | Unallocated Corporate Expenses | Consolidated | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
Nine Months Ended September 30, 2020 | ||||||||||||||||||||
Net revenue | $ | 130,041 | $ | 28,355 | $ | 13,366 | $ | — | $ | 171,762 | ||||||||||
Operating expenses | 104,704 | 23,123 | 16,443 | 11,909 | 156,179 | |||||||||||||||
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Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the disposition of assets | $ | 25,337 | $ | 5,232 | $ | (3,077 | ) | $ | (11,909 | ) | $ | 15,583 | ||||||||
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Depreciation | 4,912 | 2,284 | 212 | 700 | 8,108 | |||||||||||||||
Amortization | 18 | 1,928 | 631 | 1 | 2,578 | |||||||||||||||
Change in the estimated fair value of contingent earn-out consideration | — | (12 | ) | — | — | (12 | ) | |||||||||||||
Impairment of indefinite-lived long-term assets other than goodwill | 16,994 | — | 260 | — | 17,254 | |||||||||||||||
Impairment of goodwill | 184 | 10 | 105 | 8 | 307 | |||||||||||||||
Net (gain) loss on the disposition of assets | 1,489 | — | 1 | 4 | 1,494 | |||||||||||||||
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Net operating income (loss) | $ | 1,740 | $ | 1,022 | $ | (4,286 | ) | $ | (12,622 | ) | $ | (14,146 | ) | |||||||
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Nine Months Ended September 30, 2019 | ||||||||||||||||||||
Net revenue | $ | 142,854 | $ | 29,349 | $ | 17,062 | $ | — | $ | 189,265 | ||||||||||
Operating expenses | 111,466 | 22,988 | 17,112 | 12,386 | 163,952 | |||||||||||||||
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Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the disposition of assets | $ | 31,388 | $ | 6,361 | $ | (50 | ) | $ | (12,386 | ) | $ | 25,313 | ||||||||
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Depreciation | 5,399 | 2,302 | 289 | 539 | 8,529 | |||||||||||||||
Amortization | 26 | 2,907 | 633 | 1 | 3,567 | |||||||||||||||
35
Broadcast | Digital Media | Publishing | Unallocated Corporate Expenses | Consolidated | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Three Months Ended June 30, 2021 | ||||||||||||||||||||
Net revenue | $ | 46,783 | $ | 10,339 | $ | 6,660 | $ | — | $ | 63,782 | ||||||||||
Operating expenses | 36,162 | 8,338 | 6,426 | 4,192 | 55,118 | |||||||||||||||
Net operating income (loss) before depreciation, amortization, and net (gain) loss on the disposition of assets | $ | 10,621 | $ | 2,001 | $ | 234 | $ | (4,192 | ) | $ | 8,664 | |||||||||
Depreciation | 1,603 | 860 | 44 | 234 | 2,741 | |||||||||||||||
Amortization | 4 | 397 | 144 | — | 545 | |||||||||||||||
Net (gain) loss on the disposition of assets | — | 65 | (328 | ) | — | (263 | ) | |||||||||||||
Net operating income (loss) | $ | 9,014 | $ | 679 | $ | 374 | $ | (4,426 | ) | $ | 5,641 | |||||||||
Three Months Ended June 30, 2020 | ||||||||||||||||||||
Net revenue | $ | 39,470 | $ | 9,443 | $ | 3,958 | $ | — | $ | 52,871 | ||||||||||
Operating expenses | 33,094 | 7,653 | 5,567 | 3,850 | 50,164 | |||||||||||||||
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments, and net (gain) loss on the disposition of assets | $ | 6,376 | $ | 1,790 | $ | (1,609 | ) | $ | (3,850 | ) | $ | 2,707 | ||||||||
Depreciation | 1,641 | 767 | 73 | 237 | 2,718 | |||||||||||||||
Amortization | 5 | 623 | 211 | 1 | 840 | |||||||||||||||
Change in the estimated fair value of contingent earn-out consideration | — | 3 | — | — | 3 | |||||||||||||||
Net (gain) loss on the disposition of assets | 30 | — | — | 4 | 34 | |||||||||||||||
Net operating income (loss) | $ | 4,700 | $ | 397 | $ | (1,893 | ) | $ | (4,092 | ) | $ | (888 | ) | |||||||
Broadcast | Digital Media | Publishing | Unallocated Corporate Expenses | Consolidated | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Six Months Ended June 30, 2021 | ||||||||||||||||||||
Net revenue | $ | 90,831 | $ | 19,958 | $ | 12,346 | $ | — | $ | 123,135 | ||||||||||
Operating expenses | 69,505 | 17,011 | 11,631 | 8,480 | 106,627 | |||||||||||||||
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments, and net (gain) loss on the disposition of assets | $ | 21,326 | $ | 2,947 | $ | 715 | $ | (8,480 | ) | $ | 16,508 | |||||||||
Depreciation | 3,128 | 1,641 | 91 | 470 | 5,330 | |||||||||||||||
Amortization | 8 | 829 | 289 | — | 1,126 | |||||||||||||||
Net (gain) loss on the disposition of assets | 318 | 65 | (328 | ) | — | 55 | ||||||||||||||
Net operating income (loss) | $ | 17,872 | $ | 412 | $ | 663 | $ | (8,950 | ) | $ | 9,997 | |||||||||
Six Months Ended June 30, 2020 | ||||||||||||||||||||
Net revenue | $ | 84,650 | $ | 18,547 | $ | 7,924 | $ | — | $ | 111,121 | ||||||||||
Operating expenses | 70,421 | 15,979 | 10,629 | 8,060 | 105,089 | |||||||||||||||
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments, and net (gain) loss on the disposition of assets | $ | 14,229 | $ | 2,568 | $ | (2,705 | ) | $ | (8,060 | ) | $ | 6,032 | ||||||||
Depreciation | 3,286 | 1,538 | 142 | 465 | 5,431 | |||||||||||||||
Amortization | 14 | 1,391 | 421 | 1 | 1,827 | |||||||||||||||
Change in the estimated fair value of contingent earn-out consideration | — | (2 | ) | — | — | (2 | ) | |||||||||||||
Impairment of indefinite-lived long-term assets other than goodwill | 16,994 | — | 260 | — | 17,254 | |||||||||||||||
Impairment of goodwill | 184 | 10 | 105 | 8 | 307 | |||||||||||||||
Net (gain) loss on the disposition of assets | 109 | — | — | 4 | 113 | |||||||||||||||
Net operating income (loss) | $ | (6,358 | ) | $ | (369 | ) | $ | (3,633 | ) | $ | (8,538 | ) | $ | (18,898 | ) | |||||
Change in the estimated fair value of contingent earn-out consideration | — | (40 | ) | — | — | (40 | ) | |||||||||||||||||||||||||||||||||
Impairment of indefinite-lived long-term assets other than goodwill | 1,915 | — | — | — | 1,915 | |||||||||||||||||||||||||||||||||||
Net (gain) loss on the disposition of assets | 20,951 | 260 | 1 | — | 21,212 | |||||||||||||||||||||||||||||||||||
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Net operating income (loss) | $ | 3,097 | $ | 932 | $ | (973 | ) | $ | (12,926 | ) | $ | (9,870 | ) | |||||||||||||||||||||||||||
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Broadcast | Digital Media | Publishing | Unallocated Corporate | Consolidated | ||||||||||||||||||||||||||||||||||||
| Broadcast | Digital Media | Publishing | Unallocated Corporate | Consolidated | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
As of September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||
As of June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||
Inventories, net | $ | — | $ | — | $ | 618 | $ | — | $ | 618 | $ | — | $ | — | $ | 719 | $ | — | $ | 719 | ||||||||||||||||||||
Property and equipment, net | 65,438 | 6,490 | 763 | 8,032 | 80,723 | 63,616 | 6,746 | 741 | 8,312 | 79,415 | ||||||||||||||||||||||||||||||
Broadcast licenses | 319,773 | — | — | — | 319,773 | 320,008 | — | — | — | 320,008 | ||||||||||||||||||||||||||||||
Goodwill | 2,746 | 19,565 | 1,446 | — | 23,757 | 2,750 | 19,589 | 1,446 | — | 23,785 | ||||||||||||||||||||||||||||||
Other indefinite-lived intangible assets | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Amortizable intangible assets, net | 250 | 3,922 | 547 | — | 4,719 | 237 | 2,941 | 48 | — | 3,226 | ||||||||||||||||||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
Inventories, net | $ | — | $ | — | $ | 717 | $ | — | $ | 717 | $ | — | $ | — | $ | 495 | $ | — | $ | 495 | ||||||||||||||||||||
Property and equipment, net | 72,816 | 6,127 | 801 | 7,929 | 87,673 | 64,231 | 6,221 | 741 | 7,929 | 79,122 | ||||||||||||||||||||||||||||||
Broadcast licenses | 337,858 | — | — | — | 337,858 | 319,773 | — | — | — | 319,773 | ||||||||||||||||||||||||||||||
Goodwill | 2,930 | 19,509 | 1,551 | 8 | 23,998 | 2,746 | 19,565 | 1,446 | — | 23,757 | ||||||||||||||||||||||||||||||
Other indefinite-lived intangible assets | — | — | 260 | — | 260 | |||||||||||||||||||||||||||||||||||
Amortizable intangible assets, net | 268 | 5,653 | 1,178 | 1 | 7,100 | 246 | 3,434 | 337 | — | 4,017 | ||||||||||||||||||||||||||||||
On October 20, 2020, we entered into
in cash. The digital content library is operated within Salem Web Network’s church products division.
36
37
38
Nielsen Audio uses the Portable People Meteronly 227 of our broadcast markets.
cash.
Web-based and digital content continues to be a focus of future development.
Digital
39
Publishing operating expenses include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as lease costs and utilities, (iii) marketing and promotional expenses; and (iv) cost of goods sold that includes printing and production costs, fulfillment costs, author royalties and inventory reserves.
In
Future Our businesses could also continue to be impacted by the disruptions from
limiting capital expenditures except for emergency-only requirements;
reducing all discretionary spending, including travel and entertainment;
eliminating open positions and freezing new hires;
reducing staffing levels;
implementing temporary company-wide pay cuts ranging from 5%, 7.5% or 10% depending on salary level;
furloughing certain employees that are non-essential at this time;
temporarily suspending the company 401K match;
requesting rent concessions from landlords;
requesting discounts from vendors;
offering early payment discounts to certain customers in exchange for advance cash payments;
offering extended payment terms of up to 90 days to limit cancellations and entice new business;
considering sales-leaseback of owned facilities; and
suspending the payment of distributions on our common stock indefinitely.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. We have utilized certain benefits of the CARES Act, including:
the deferral of all employer FICA taxes beginning in April 2020 for the remainder of 2020, with 50% payable in December 2021 and the remainder payable in December 2022; and
relaxation of interest expense deduction limitation for income tax purposes.
We reforecast our anticipated results extending through November 2021. Our reforecast includes the impact of certain of these cost-cutting measures. We may consider sales-leaseback of owned facilities if the adverse economic impact of the COVID-19 pandemic continues beyond 2020. Based on our current and expected economic outlook and our current and expected funding needs, we believe that the borrowing capacity under our current credit facilities, together with cash on hand, allows us to meet our ongoing operating requirements, fund necessary capital expenditures and satisfy our debt service requirements for at least the next twelve months, including the working capital deficit at September 30, 2020. Based on our current assessment, we believe that we have the ability to meet our obligations as they come due for one year from the issuance of these financial statements.
40
We continue to review and consider any available potential benefit under the CARES Act for which we qualify. We cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. If the U.S. government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.
The ultimate impact of these disruptions, including the extent of their adverse impact on our financial and operating results, will be affected by the length of time that such disruptions continue, which will, in turn, depend on the currently unknown duration of the COVID-19 pandemic and the impact of governmental regulations and other restrictions that have been or may be imposed in response to the pandemic. Our businesses could also continue to be impacted by the disruptions from COVID-19 and resulting adverse changes in advertising customers and consumer behavior.
The growth of broadcast revenue associated with the sale of airtime remains challenged. We believe this is due to increased competition from other forms of content distribution and the length of time spent listening to audio streaming services, podcasts and satellite radio. Increases in competition and the mix in listening time may lead advertisers to conclude that the effectiveness of radio has diminished. To minimizereduce the impact of these factors, we continue to enhance our digital assets to complement our broadcast content. The increaseincreased use of voice activated platforms, or smart speakers, that provide audiences with the ability to access AM and FM radio stations show increased potential for broadcasters to reach audiences.
Revenues
41
Item 10(e) of Regulation
42
We use
43
Reconciliation of
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue |
| |||||||||||||||
Net broadcast revenue | $ | 47,679 | $ | 45,391 | $ | 142,854 | $ | 130,041 | ||||||||
Net broadcast revenue – acquisitions | — | — | — | — | ||||||||||||
Net broadcast revenue – dispositions | (1,328 | ) | (24 | ) | (4,342 | ) | (72 | ) | ||||||||
Net broadcast revenue – format change | (661 | ) | (766 | ) | (1,874 | ) | (2,328 | ) | ||||||||
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Same Station net broadcast revenue | $ | 45,690 | $ | 44,601 | $ | 136,638 | $ | 127,641 | ||||||||
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Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses |
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Broadcast operating expenses | $ | 37,310 | $ | 34,283 | $ | 111,466 | $ | 104,704 | ||||||||
Broadcast operating expenses – acquisitions | — | — | — | (2 | ) | |||||||||||
Broadcast operating expenses – dispositions | (1,748 | ) | — | (5,161 | ) | (110 | ) | |||||||||
Broadcast operating expenses – format change | (698 | ) | (796 | ) | (2,014 | ) | (2,620 | ) | ||||||||
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Same Station broadcast operating expenses | $ | 34,864 | $ | 33,487 | $ | 104,291 | $ | 101,972 | ||||||||
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Reconciliation of Operating Income to Same Station Operating Income |
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Station Operating Income | $ | 10,369 | $ | 11,108 | $ | 31,388 | $ | 25,337 | ||||||||
Station operating loss –acquisitions | — | — | — | 2 | ||||||||||||
Station operating (income) loss – dispositions | 420 | (24 | ) | 819 | 38 | |||||||||||
Station operating loss – format change | 37 | 30 | 140 | 292 | ||||||||||||
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Same Station – Station Operating Income | $ | 10,826 | $ | 11,114 | $ | 32,347 | $ | 25,669 | ||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue | ||||||||||||||||
Net broadcast revenue | $ | 39,470 | $ | 46,783 | $ | 84,650 | $ | 90,831 | ||||||||
Net broadcast revenue – acquisitions | — | (79 | ) | — | (79 | ) | ||||||||||
Net broadcast revenue – dispositions | (220 | ) | (42 | ) | (443 | ) | (38 | ) | ||||||||
Net broadcast revenue – format change | (104 | ) | (205 | ) | (280 | ) | (345 | ) | ||||||||
Same Station net broadcast revenue | $ | 39,146 | $ | 46,457 | $ | 83,927 | $ | 90,369 | ||||||||
Reconciliation of Broadcast Operating Expenses To Same Station Broadcast Operating Expenses | ||||||||||||||||
Broadcast operating expenses | $ | 33,094 | $ | 36,162 | $ | 70,421 | $ | 69,505 | ||||||||
Broadcast operating expenses – acquisitions | — | (38 | ) | — | (38 | ) | ||||||||||
Broadcast operating expenses – dispositions | (379 | ) | (79 | ) | (881 | ) | (185 | ) | ||||||||
Broadcast operating expenses – format change | (259 | ) | (206 | ) | (519 | ) | (384 | ) | ||||||||
Same Station broadcast operating expenses | $ | 32,456 | $ | 35,839 | $ | 69,021 | $ | 68,898 | ||||||||
Reconciliation of Operating Income to Same Station Operating Income | ||||||||||||||||
Station Operating Income | $ | 6,376 | $ | 10,621 | $ | 14,229 | $ | 21,326 | ||||||||
Station operating (income) loss –acquisitions | — | (41 | ) | — | (41 | ) | ||||||||||
Station operating loss – dispositions | 159 | 37 | 438 | 147 | ||||||||||||
Station operating loss – format change | 155 | 1 | 239 | 39 | ||||||||||||
Same Station – Station Operating Income | $ | 6,690 | $ | 10,618 | $ | 14,906 | $ | 21,471 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss) |
| |||||||||||||||
Net broadcast revenue | $ | 47,679 | $ | 45,391 | $ | 142,854 | $ | 130,041 | ||||||||
Less broadcast operating expenses | (37,310 | ) | (34,283 | ) | (111,466 | ) | (104,704 | ) | ||||||||
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Station Operating Income | $ | 10,369 | $ | 11,108 | $ | 31,388 | $ | 25,337 | ||||||||
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Net digital media revenue | $ | 9,149 | $ | 9,808 | $ | 29,349 | $ | 28,355 | ||||||||
Less digital media operating expenses | (7,282 | ) | (7,144 | ) | (22,988 | ) | (23,123 | ) | ||||||||
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Digital Media Operating Income | $ | 1,867 | $ | 2,664 | $ | 6,361 | $ | 5,232 | ||||||||
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Net publishing revenue | $ | 7,288 | $ | 5,442 | $ | 17,062 | $ | 13,366 | ||||||||
Less publishing operating expenses | (6,517 | ) | (5,814 | ) | (17,112 | ) | (16,443 | ) | ||||||||
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Publishing Operating Income (Loss) | $ | 771 | $ | (372 | ) | $ | (50 | ) | $ | (3,077 | ) | |||||
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44
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss) | ||||||||||||||||
Net broadcast revenue | $ | 39,470 | $ | 46,783 | $ | 84,650 | $ | 90,831 | ||||||||
Less broadcast operating expenses | (33,094 | ) | (36,162 | ) | (70,421 | ) | (69,505 | ) | ||||||||
Station Operating Income | $ | 6,376 | $ | 10,621 | $ | 14,229 | $ | 21,326 | ||||||||
Net digital media revenue | $ | 9,443 | $ | 10,339 | $ | 18,547 | $ | 19,958 | ||||||||
Less digital media operating expenses | (7,653 | ) | (8,338 | ) | (15,979 | ) | (17,011 | ) | ||||||||
Digital Media Operating Income | $ | 1,790 | $ | 2,001 | $ | 2,568 | $ | 2,947 | ||||||||
Net publishing revenue | $ | 3,958 | $ | 6,660 | $ | 7,924 | $ | 12,346 | ||||||||
Less publishing operating expenses | (5,567 | ) | (6,426 | ) | (10,629 | ) | (11,631 | ) | ||||||||
Publishing Operating Income (Loss) | $ | (1,609 | ) | $ | 234 | $ | (2,705 | ) | $ | 715 | ||||||
In the table below, we present a reconciliation of net income (loss), the most directly comparable GAAP measure to Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss). Our presentation of theseisare not to be considered a substitute for or superior to the most directly comparable measures reported in accordance with GAAP.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Reconciliation of Net Income (Loss) to Operating Income and Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss) |
| |||||||||||||||
Net income (loss) | $ | (20,005 | ) | $ | 329 | $ | (23,327 | ) | $ | (57,390 | ) | |||||
Plus provision for (benefit from) income taxes | 1,108 | 401 | 697 | 31,180 | ||||||||||||
Plus net miscellaneous income and (expenses) | — | (1 | ) | (19 | ) | 45 | ||||||||||
Plus (gain) on early retirement of long-term debt | — | — | (426 | ) | (49 | ) | ||||||||||
Plus interest expense, net of capitalized interest | 4,410 | 4,024 | 13,206 | 12,069 | ||||||||||||
Less interest income | — | (1 | ) | (1 | ) | (1 | ) | |||||||||
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| |||||||||
Net operating income (loss) | $ | (14,487 | ) | $ | 4,752 | $ | (9,870 | ) | $ | (14,146 | ) | |||||
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| |||||||||
Plus net (gain) loss on the disposition of assets | 17,545 | 1,381 | 21,212 | 1,494 | ||||||||||||
Plus change in the estimated fair value of contingent earn-out consideration | (40 | ) | (10 | ) | (40 | ) | (12 | ) | ||||||||
Plus impairment of indefinite-lived long-term assets other than goodwill | 1,915 | — | 1,915 | 17,254 | ||||||||||||
Plus impairment of goodwill | — | — | — | 307 | ||||||||||||
Plus depreciation and amortization | 3,891 | 3,428 | 12,096 | 10,686 | ||||||||||||
Plus unallocated corporate expenses | 4,183 | 3,849 | 12,386 | 11,909 | ||||||||||||
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Combined Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss) | $ | 13,007 | $ | 13,400 | $ | 37,699 | $ | 27,492 | ||||||||
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Station Operating Income | $ | 10,369 | $ | 11,108 | $ | 31,388 | $ | 25,337 | ||||||||
Digital Media Operating Income | 1,867 | 2,664 | 6,361 | 5,232 | ||||||||||||
Publishing Operating Income (Loss) | 771 | (372 | ) | (50 | ) | (3,077 | ) | |||||||||
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| $ | 13,007 | $ | 13,400 | $ | 37,699 | $ | 27,492 | |||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Reconciliation of Net Income (Loss) to Operating Income and Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss) | ||||||||||||||||
Net income (loss) | $ | (2,515 | ) | $ | 2,257 | $ | (57,719 | ) | $ | 2,580 | ||||||
Plus provision for (benefit from) income taxes | (2,380 | ) | (488 | ) | 30,779 | (358 | ) | |||||||||
Plus net miscellaneous income and (expenses) | (6 | ) | (63 | ) | 46 | (85 | ) | |||||||||
Plus (gain) on early retirement of long-term debt | — | — | (49 | ) | — | |||||||||||
Plus interest expense, net of capitalized interest | 4,013 | 3,935 | 8,045 | 7,861 | ||||||||||||
Less interest income | — | — | — | (1 | ) | |||||||||||
Net operating income (loss) | $ | (888 | ) | $ | 5,641 | $ | (18,898 | ) | $ | 9,997 | ||||||
Plus net (gain) loss on the disposition of assets | 34 | (263 | ) | 113 | 55 | |||||||||||
Plus change in the estimated fair value of contingent earn-out consideration | 3 | — | (2 | ) | — | |||||||||||
Plus impairment of indefinite-lived long-term assets other than goodwill | — | — | 17,254 | — | ||||||||||||
Plus impairment of goodwill | — | — | 307 | — | ||||||||||||
Plus depreciation and amortization | 3,558 | 3,286 | 7,258 | 6,456 | ||||||||||||
Plus unallocated corporate expenses | 3,850 | 4,192 | 8,060 | 8,480 | ||||||||||||
Combined Station Operating Income, Digital Media Operating Income and Publishing Operating Loss | $ | 6,557 | $ | 12,856 | $ | 14,092 | $ | 24,988 | ||||||||
Station Operating Income | $ | 6,376 | $ | 10,621 | $ | 14,229 | $ | 21,326 | ||||||||
Digital Media Operating Income | 1,790 | 2,001 | 2,568 | 2,947 | ||||||||||||
Publishing Operating Income (Loss) | (1,609 | ) | 234 | (2,705 | ) | 715 | ||||||||||
| $ | 6,557 | $ | 12,856 | $ | 14,092 | $ | 24,988 | |||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2019 | 2020 | 2019 | 2020 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Reconciliation of Adjusted EBITDA to EBITDA to Net Income (Loss) |
| |||||||||||||||
Net income (loss) | $ | (20,005 | ) | $ | 329 | $ | (23,327 | ) | $ | (57,390 | ) | |||||
Plus interest expense, net of capitalized interest | 4,410 | 4,024 | 13,206 | 12,069 | ||||||||||||
Plus provision for (benefit from) income taxes | 1,108 | 401 | 697 | 31,180 | ||||||||||||
Plus depreciation and amortization | 3,891 | 3,428 | 12,096 | 10,686 | ||||||||||||
Less interest income | — | (1 | ) | (1 | ) | (1 | ) | |||||||||
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EBITDA | $ | (10,596 | ) | $ | 8,181 | $ | 2,671 | $ | (3,456 | ) | ||||||
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| |||||||||
Plus net (gain) loss on the disposition of assets | 17,545 | 1,381 | 21,212 | 1,494 | ||||||||||||
Plus change in the estimated fair value of contingent earn-out consideration | (40 | ) | (10 | ) | (40 | ) | (12 | ) | ||||||||
Plus impairment of indefinite-lived long-term assets other than goodwill | 1,915 | — | 1,915 | 17,254 | ||||||||||||
Plus impairment of goodwill | — | — | — | 307 | ||||||||||||
Plus net miscellaneous (income) and expenses | — | (1 | ) | (19 | ) | 45 | ||||||||||
Plus (gain) on early retirement of long-term debt | — | — | (426 | ) | (49 | ) | ||||||||||
Plus non-cash stock-based compensation | 177 | 74 | 1,289 | 273 | ||||||||||||
Plus ASC 842 lease adoption | — | — | 171 | — | ||||||||||||
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Adjusted EBITDA | $ | 9,001 | $ | 9,625 | $ | 26,773 | $ | 15,856 | ||||||||
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45
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Reconciliation of Adjusted EBITDA to EBITDA to Net Income (Loss) | ||||||||||||||||
Net income (loss) | $ | (2,515 | ) | $ | 2,257 | $ | (57,719 | ) | $ | 2,580 | ||||||
Plus interest expense, net of capitalized interest | 4,013 | 3,935 | 8,045 | 7,861 | ||||||||||||
Plus provision for (benefit from) income taxes | (2,380 | ) | (488 | ) | 30,779 | (358 | ) | |||||||||
Plus depreciation and amortization | 3,558 | 3,286 | 7,258 | 6,456 | ||||||||||||
Less interest income | — | — | — | (1 | ) | |||||||||||
EBITDA | $ | 2,676 | $ | 8,990 | $ | (11,637 | ) | $ | 16,538 | |||||||
Plus net (gain) loss on the disposition of assets | 34 | (263 | ) | 113 | 55 | |||||||||||
Plus change in the estimated fair value of contingent earn-out consideration | 3 | — | (2 | ) | — | |||||||||||
Plus impairment of indefinite-lived long-term assets other than goodwill | — | — | 17,254 | — | ||||||||||||
Plus impairment of goodwill | — | — | 307 | — | ||||||||||||
Plus net miscellaneous (income) and expenses | (6 | ) | (63 | ) | 46 | (85 | ) | |||||||||
Plus (gain) on early retirement of long-term debt | — | — | (49 | ) | — | |||||||||||
Plus non-cash stock-based compensation | 96 | 84 | 199 | 162 | ||||||||||||
Adjusted EBITDA | $ | 2,803 | $ | 8,748 | $ | 6,231 | $ | 16,670 | ||||||||
2020
Based on the timingDivestitures
On November 14, 2019, we sold nine radio stations, WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis, Missouri for $8.7 million in cash.
On September 26, 2019, we sold four radio stations, WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and WOCN-AM (formerly WKAT-AM) in Miami, Florida for $8.2 million in cash.
On September 18, 2019, we sold radio station WDYZ-AM (formerly WORL-AM) in Orlando, Florida for $0.9 million in cash.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Broadcast Revenue | $ | 47,679 | $ | 45,391 | $ | (2,288 | ) | (4.8 | )% | 74.4 | % | 74.9 | % | |||||||||||
Same Station Net Broadcast Revenue | $ | 45,690 | $ | 44,601 | $ | (1,089 | ) | (2.4 | )% | |||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Broadcast Revenue | $ | 39,470 | $ | 46,783 | $ | 7,313 | 18.5 | % | 74.7 | % | 73.3 | % | ||||||||||||
Same Station Net Broadcast Revenue | $ | 39,146 | $ | 46,457 | $ | 7,311 | 18.7 | % | ||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| 2019 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Block Programming: | ||||||||||||||||
National | $ | 12,198 | 25.6 | % | $ | 11,732 | 25.8 | % | ||||||||
Local | 7,547 | 15.8 | 5,771 | 12.7 | ||||||||||||
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| 19,745 | 41.4 | 17,503 | 38.5 | |||||||||||||
Broadcast Advertising: | ||||||||||||||||
National | 3,968 | 8.3 | 3,635 | 8.0 | ||||||||||||
Local | 12,781 | 26.8 | 9,485 | 20.9 | ||||||||||||
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| 16,749 | 35.1 | 13,120 | 28.9 | |||||||||||||
Station Digital (local) | 3,738 | 7.8 | 7,754 | 17.1 | ||||||||||||
Infomercials | 340 | 0.8 | 214 | 0.5 | ||||||||||||
Network | 4,662 | 9.8 | 4,891 | 10.8 | ||||||||||||
Other Revenue | 2,445 | 5.1 | 1,909 | 4.2 | ||||||||||||
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| |||||||||
Net Broadcast Revenue | $ | 47,679 | 100.0 | % | $ | 45,391 | 100.0 | % | ||||||||
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Three Months Ended June 30, | ||||||||||||||||
| 2020 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Block Programming: | ||||||||||||||||
National | $ | 11,770 | 29.8 | % | $ | 11,861 | 25.4 | % | ||||||||
Local | 5,632 | 14.3 | % | 5,817 | 12.4 | % | ||||||||||
| 17,402 | 44.1 | % | 17,678 | 37.8 | % | |||||||||||
Broadcast Advertising: | ||||||||||||||||
National | 2,587 | 6.6 | % | 3,458 | 7.4 | % | ||||||||||
Local | 7,788 | 19.7 | % | 10,546 | 22.5 | % | ||||||||||
| 10,375 | 26.3 | % | 14,004 | 29.9 | % | |||||||||||
Broadcast Digital (local) | 5,655 | 14.3 | % | 7,728 | 16.5 | % | ||||||||||
Infomercials | 228 | 0.6 | % | 225 | 0.5 | % | ||||||||||
Network | 4,226 | 10.7 | % | 4,950 | 10.6 | % | ||||||||||
Other Revenue | 1,584 | 4.0 | % | 2,198 | 4.7 | % | ||||||||||
Net Broadcast Revenue | $ | 39,470 | 100.0 | % | $ | 46,783 | 100.0 | % | ||||||||
46
Advertising revenue, net of agency commissions, declinedincreased by $3.6 million, including a $3.3$2.7 million declineincrease in local advertising and a $0.3$0.9 million declineincrease in national advertising revenue. Netadvertising. Excluding the impact of political, advertising revenue declinedincreased by $4.1$3.5 million, of which $3.5$2.7 million was local and $0.6$0.8 million was national. Local advertising declined by $1.3Increases, net of political, include $2.5 million onfrom our Contemporary Christian Music format radio stations, due to lower spot rates charged to compete with other broadcasters that offered lower rates, primarily in the Atlanta andour Dallas, Los Angeles, and Atlanta markets, $0.8$0.4 million onfrom our News Talk format radio stations, $0.2 million from our Christian Teaching and Talk format radio stations and $0.8$0.5 million onincrease from other station formats, that were offset by a $0.1 million decline from our NewsSpanish Christian Teaching and Talk format radio stations. The remainder of the decline was dueincreases are attributable to the impact of stations sold during 2019 and the impact of the COVID-19a higher demand for airtime associated with improving economic conditions as pandemic with several advertisers reducing or ceasingrestrictions begin to advertise due to stay-at-home orders and limited capacity ordersease that have temporarily closed their businesses.
Localcan in turn result in higher spot rates for prime airtime spots.
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Digital Media Revenue | $ | 9,443 | $ | 10,339 | $ | 896 | 9.5 | % | 17.9 | % | 16.2 | % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||
| 2020 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Digital Advertising, net | $ | 4,547 | 48.2 | % | $ | 4,393 | 42.5 | % | ||||||||
Digital Streaming | 853 | 9.0 | 862 | 8.3 | ||||||||||||
Digital Subscriptions | 2,157 | 22.8 | 3,299 | 31.9 | ||||||||||||
Digital Downloads | 1,802 | 19.1 | 1,694 | 16.4 | ||||||||||||
e-commerce | 27 | 0.3 | 67 | 0.6 | ||||||||||||
Other Revenues | 57 | 0.6 | 24 | 0.2 | ||||||||||||
Net Digital Media Revenue | $ | 9,443 | 100.0 | % | $ | 10,339 | 100.0 | % | ||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Publishing Revenue | $ | 3,958 | $ | 6,660 | $ | 2,702 | 68.3 | % | 7.5 | % | 10.4 | % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||
| 2020 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Book Sales | $ | 2,698 | 68.2 | % | $ | 6,212 | 93.3 | % | ||||||||
Estimated Sales Returns & Allowances | (560 | ) | (14.1 | ) | (1,918 | ) | (28.8 | ) | ||||||||
Net Book Sales | 2,138 | 54.1 | 4,294 | 64.5 | ||||||||||||
E-Book Sales | 250 | 6.3 | 453 | 6.8 | ||||||||||||
Self-Publishing Fees | 1,051 | 26.5 | 1,550 | 23.3 | ||||||||||||
Print Magazine Subscriptions | 174 | 4.4 | 104 | 1.6 | ||||||||||||
Print Magazine Advertisements | 91 | 2.3 | 54 | 0.8 | ||||||||||||
Digital Advertising | 52 | 1.3 | 70 | 1.1 | ||||||||||||
Other Revenue | 202 | 5.1 | 135 | 2.0 | ||||||||||||
Net Publishing Revenue | $ | 3,958 | 100.0 | % | $ | 6,660 | 100.0 | % | ||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change | Change | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Broadcast Operating Expenses | $ | 33,094 | $ | 36,162 | $ | 3,068 | 9.3 | % | 62.6 | % | 56.7 | % | ||||||||||||
Same Station Broadcast Operating Expenses | $ | 32,456 | $ | 35,839 | $ | 3,383 | 10.4 | % | ||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Digital Media Operating Expenses | $ | 7,653 | $ | 8,338 | $ | 685 | 9.0 | % | 14.5 | % | 13.1 | % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Publishing Operating Expenses | $ | 5,567 | $ | 6,426 | $ | 859 | 15.4 | % | 10.5 | % | 10.1 | % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Unallocated Corporate Expenses | $ | 3,850 | $ | 4,192 | $ | 342 | 8.9 | % | 7.3 | % | 6.6 | % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Depreciation Expense | $ | 2,718 | $ | 2,741 | $ | 23 | 0.8 | % | 5.1 | % | 4.3 | % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||||
Amortization Expense | $ | 840 | $ 545 | $ | (295 | ) | (35.1) % | 1.6 | % | 0.9 | % | |||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net (Gain) Loss on the Disposition of assets | $ | 34 | $ | (263 | ) | $ | (297 | ) | (873.5) % | 0.1 | % | (0.4) % | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Interest Expense | $ | (4,013 | ) | $ | (3,935 | ) | 78 | (1.9) % | (7.6) % | (6.2) % | ||||||||||||||
Net Miscellaneous Income and (Expenses) | 6 | 63 | 57 | 950.0% | — % | 0.1% | ||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Provision for (Benefit from) Income Taxes | $ | (2,380 | ) | $ | (488 | ) | $ | 1,892 | (79.5) % | (4.5) % | (0.8) % | |||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Income (Loss) | $ | (2,515 | ) | $ | 2,257 | $ | 4,772 | (189.7) % | (4.8) % | 3.5 | % | |||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Broadcast Revenue | $ | 84,650 | $ | 90,831 | $ | 6,181 | 7.3 | % | 76.2 | % | 73.8 | % | ||||||||||||
Same Station Net Broadcast Revenue | $ | 83,927 | $ | 90,369 | $ | 6,422 | 7.7 | % | ||||||||||||||||
Six Months Ended June 30, | ||||||||||||||||
| 2020 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Block Programming: | ||||||||||||||||
National | $ | 23,804 | 28.1 | % | $ | 23,322 | 25.7 | % | ||||||||
Local | 12,440 | 14.7 | % | 11,773 | 13.0 | % | ||||||||||
| 36,244 | 42.8 | % | 35,095 | 38.6 | % | |||||||||||
Broadcast Advertising: | ||||||||||||||||
National | 6,544 | 7.7 | % | 7,118 | 7.8 | % | ||||||||||
Local | 19,145 | 22.6 | % | 19,441 | 21.4 | % | ||||||||||
| 25,689 | 30.3 | % | 26,559 | 29.2 | % | |||||||||||
Broadcast Digital (local) | 9,948 | 11.8 | % | 14,797 | 16.3 | % | ||||||||||
Infomercials | 536 | 0.6 | % | 462 | 0.5 | % | ||||||||||
Network | 8,614 | 10.2 | % | 9,821 | 10.8 | % | ||||||||||
Other Revenue | 3,619 | 4.3 | % | 4,097 | 4.5 | % | ||||||||||
Net Broadcast Revenue | $ | 84,650 | 100.0 | % | $ | 90,831 | 100.0 | % | ||||||||
political advertising.
weather which can affect attendance.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) |
| % of Total Net Revenue | ||||||||||||||||||||||
Net Digital Media Revenue | $ | 9,149 | $ | 9,808 | $ | 659 | 7.2 | % | 14.3 | % | 16.2 | % | ||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Digital Media | $ | 18,547 | $ | 19,958 | $ | 1,411 | 7.6 | % | 16.7 | % | 16.2 | % | ||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| 2019 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Digital Advertising, net | $ | 4,820 | 52.7 | % | $ | 5,213 | 53.2 | % | ||||||||
Digital Streaming | 966 | 10.5 | 843 | 8.6 | ||||||||||||
Digital Subscriptions | 2,005 | 21.9 | 2,387 | 24.3 | ||||||||||||
Digital Downloads | 1,232 | 13.5 | 1,244 | 12.7 | ||||||||||||
e-commerce | 25 | 0.3 | 53 | 0.5 | ||||||||||||
Other Revenues | 101 | 1.1 | 68 | 0.7 | ||||||||||||
|
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| |||||||||
Net Digital Media Revenue | $ | 9,149 | 100.0 | % | $ | 9,808 | 100.0 | % | ||||||||
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Six Months Ended June 30, | ||||||||||||||||
| 2020 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Digital Advertising, net | $ | 9,260 | 49.9 | % | $ | 8,806 | 44.1 | % | ||||||||
Digital Streaming | 1,768 | 9.5 | 1,706 | 8.5 | ||||||||||||
Digital Subscriptions | 4,292 | 23.2 | 6,072 | 30.4 | ||||||||||||
Digital Downloads | 3,047 | 16.4 | 3,173 | 15.9 | ||||||||||||
e-commerce | 55 | 0.3 | 98 | 0.5 | ||||||||||||
Other Revenues | 125 | 0.7 | 103 | 0.5 | ||||||||||||
Net Digital Media Revenue | $ | 18,547 | 100.0 | % | $ | 19,958 | 100.0 | % | ||||||||
47
rates.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Publishing Revenue | $ | 7,288 | $ | 5,442 | $ | (1,846 | ) | (25.3 | )% | 11.4 | % | 9.0 | % | |||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Publishing Revenue | $ | 7,924 | $ | 12,346 | $ | 4,422 | 55.8 | % | 7.1 | % | 10.0 | % | ||||||||||||
| Three Months Ended September 30, | ||||||||||||||||
| 2019 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Book Sales | $ | 6,129 | 84.1 | % | $ | 4,310 | 79.2 | % | ||||||||
Estimated Sales Returns & Allowances | (1,958 | ) | (26.9 | ) | (1,322 | ) | (24.3 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net Book Sales | 4,171 | 57.2 | 2,988 | 54.9 | ||||||||||||
E-Book Sales | 764 | 10.5 | 456 | 8.4 | ||||||||||||
Self-Publishing Fees | 1,533 | 21.0 | 1,407 | 25.8 | ||||||||||||
Print Magazine Subscriptions | 188 | 2.6 | 168 | 3.1 | ||||||||||||
Print Magazine Advertisements | 194 | 2.7 | 85 | 1.6 | ||||||||||||
Digital Advertising | 108 | 1.5 | 65 | 1.2 | ||||||||||||
Other Revenue | 330 | 4.5 | 273 | 5.0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Publishing Revenue | $ | 7,288 | 100.0 | % | $ | 5,442 | 100.0 | % | ||||||||
|
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|
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|
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|
| |||||||||
Six Months Ended June 30, | ||||||||||||||||
| 2020 | 2021 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Book Sales | $ | 5,391 | 68.0 | % | $ | 10,513 | 85.2 | % | ||||||||
Estimated Sales Returns & Allowances | (1,530 | ) | (19.3 | ) | (3,011 | ) | (24.4 | ) | ||||||||
Net Book Sales | 3,861 | 48.7 | 7,502 | 60.8 | ||||||||||||
E-Book Sales | 504 | 6.4 | 792 | 6.4 | ||||||||||||
Self-Publishing Fees | 2,453 | 31.0 | 3,174 | 25.7 | ||||||||||||
Print Magazine Subscriptions | 351 | 4.4 | 262 | 2.1 | ||||||||||||
Print Magazine Advertisements | 193 | 2.4 | 122 | 1.0 | ||||||||||||
Digital Advertising | 151 | 1.9 | 132 | 1.1 | ||||||||||||
Other Revenue | 411 | 5.2 | 362 | 2.9 | ||||||||||||
Net Publishing Revenue | $ | 7,924 | 100.0 | % | $ | 12,346 | 100.0 | % | ||||||||
authors.
Digital adverting revenue from Regnery® Publishing websites declined due to a lower demand due to the COVID-19 pandemic closing most bookstores with rates that are comparable to the same period of the prior year.
sale.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Broadcast Operating Expenses | $ | 37,310 | $ | 34,283 | $ | (3,027 | ) | (8.1 | )% | 58.2 | % | 56.5 | % | |||||||||||
Same Station Broadcast Operating Expenses | $ | 34,864 | $ | 33,487 | $ | (1,377 | ) | (1.4 | )% | |||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Broadcast Operating Expenses | $ | 70,421 | $ | 69,505 | $ | (916 | ) | (1.3 | )% | 63.4 | % | 56.4 | % | |||||||||||
Same Station Broadcast Operating Expenses | $ | 69,021 | $ | 68,898 | $ | (123 | ) | (0.2 | )% | |||||||||||||||
48
Surround and SalemNOW. We implemented several cost cutting measures in response to the economic impact of the COVID-19 pandemic that resulted in a $2.3 million reduction in employee-related costs from temporary pay cuts, layoffs and furloughs, a $1.3 million decline in discretionary advertising spending, a $0.7 million decline in event costs, a $0.4 million decline in travel and entertainment expenses, a $0.3$3.0 million decline in bad debt expense asdue to the additional reserves recorded in the prior year from uncertainties of the
professional services.
changes.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Digital Media Operating Expenses | $ | 7,282 | $ | 7,144 | $ | (138 | ) | (1.9 | )% | 11.4 | % | 11.8 | % | |||||||||||
The decrease in digital
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Digital Media Operating Expenses | $ | 15,979 | $ | 17,011 | $ | 1,032 | 6.5 | % | 14.4 | % | 13.8 | % | ||||||||||||
Publishing Operating Expenses
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Publishing Operating Expenses | $ | 6,517 | $ | 5,814 | $ | (703 | ) | (10.8 | )% | 10.2 | % | 9.6 | % | |||||||||||
Publishing operating expenses decreased by $0.7 million, including a $0.5 million decrease in payroll-relatedpayroll costs and a $0.5 million decline in cost of goods sold that were offset by a $0.3$0.2 million decrease in bad debt expense, a $0.1 million decrease in costs of sales, a $0.1 million decrease in employee benefit costs due to the suspension of the 401(k) match, and $0.1 million decrease in royalties. Increases in advertising and promotional expenses are driven by a new video initiative for Eagle Financial Publications that management believes to be beneficial for the business. The increase in payroll related expenses reflects the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020.
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Publishing Operating Expenses | $ | 10,629 | $ | 11,631 | $ | 1,002 | 9.4 | % | 9.6 | % | 9.4 | % | ||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Unallocated Corporate Expenses | $ | 4,183 | $ | 3,849 | $ | (334 | ) | (8.0 | )% | 6.5 | % | 6.3 | % | |||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Unallocated Corporate Expenses | $ | 8,060 | $ | 8,480 | $ | 420 | 5.2 | % | 7.3 | % | 6.9 | % | ||||||||||||
Depreciation Expense
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Depreciation Expense | $ | 2,744 | $ | 2,677 | $ | (67 | ) | (2.4 | )% | 4.3 | % | 4.4 | % | |||||||||||
Depreciation expense was comparableemployee benefit costs due to the same periodsuspension of the 401(k) match.
Six Months Ended June 30, | ||||||||||||||||||||||||
2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Depreciation Expense | $ | 5,431 | $ | 5,330 | $ | (101 | ) | (1.9 | )% | 4.9 | % | 4.3 | % | |||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Amortization Expense | $ | 1,147 | $ | 751 | $ | (396 | ) | (34.5 | )% | 1.8 | % | 1.2 | % | |||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Amortization Expense | $ | 1,827 | $ | 1,126 | $ | (701 | ) | (38.4 | )% | 1.6 | % | 0.9 | % | |||||||||||
49
Change in the Estimated Fair Value of Contingent Earn-Out Consideration
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Change in the Estimated Fair Value of Contingent Earn-Out Consideration | $ | (40 | ) | $ | (10 | ) | $ | 30 | (75.0 | )% | (0.1 | )% | — | % | ||||||||||
Acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. We review the probabilities of possible future payments to estimate the fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable.
Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill | $ | 1,915 | $ | — | $ | (1,915 | ) | (100.0 | )% | 3.0 | % | — | % | |||||||||||
We performed an interim review of certain broadcast licenses in September 2019 based on market revenues that were trending below the forecasted amounts used in our 2018 year-end valuations. We recorded an impairment charge of $1.9 million in our Louisville, Philadelphia, Portland and San Francisco markets. There were no indications of impairment during the three months ended September 30, 2020.
Net (Gain) Loss on the Disposition of Assets
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net (Gain) Loss on the Disposition of assets | $ | 17,545 | $ | 1,381 | $ | (16,164 | ) | (92.1 | )% | 27.4 | % | 2.3 | % | |||||||||||
The net loss on the disposition of assets of $1.4 million for the three months ended September 30, 2020 reflects the estimated pre-tax loss associated with plans to exit the Miami broadcast market with the pending sale of radio station WKAT-AM.
The net loss on the disposition of assets of $17.5 million for the three months ended September 30, 2019 includes a $9.9 million estimated pre-tax loss for the pending sale of radio stations WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis, Missouri, the $4.7 million pre-tax loss from the sale of radio stations WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and WOCN-AM (formerly WKAT-AM) in Miami, Florida, a $1.6 million pre-tax loss from the sale of radio station WDYZ-AM (formerly WORL-AM) in Orlando, Florida and a $1.3 million pre-tax loss on the exchange of radio station KKOL-AM in Seattle, Washington for KPAM-AM in Portland, Oregon.
Other Income (Expense)
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Interest Income | $ | — | $ | 1 | $ | 1 | 100.0 | % | — | % | — | % | ||||||||||||
Interest Expense | (4,410 | ) | (4,024 | ) | 386 | (8.8 | )% | (6.9 | )% | (6.6 | )% | |||||||||||||
Net Miscellaneous Income and (Expenses) | — | 1 | 1 | 100.0 | % | — | % | — | % | |||||||||||||||
Interest income represents earnings on excess cash and interest due under promissory notes.
Interest expense includes interest due on outstanding debt balances, and non-cash accretion associated with deferred installments and contingent earn-out consideration from certain acquisitions. The decrease of $0.4 million reflects the impact of the lower outstanding balance on the Notes, the outstanding balances on the ABL, and finance lease obligations outstanding during the three months ended September 30, 2020. Future changes in interest rates will not impact our fixed rate Notes, but an increase in interest rates may impact the variable rate at which we can borrow under our ABL Facility and result in higher interest charges.
50
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill | $ | 17,254 | $ | — | $ | (17,254 | ) | (100.0 | )% | 15.5 | % | — | % | |||||||||||
Net miscellaneous income and expenses includes non-operating receipts such as usage fees and other expenses.
Provision for Income Taxes
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Provision for Income Taxes | $ | 1,108 | $ | 401 | $ | (707 | ) | (63.8 | )% | 1.7 | % | 0.7 | % | |||||||||||
Our provision for income taxes decreased by $0.7 million to $0.4 million for the three months ended September 30, 2020 compared to $1.1 million for the same period of the prior year. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate, was 54.9% for the three months ended September 30, 2020 compared to (5.9)% for the same period of the prior year. The effective tax rate for each period differs from the federal statutory income rate of 21.0% due to the effect of the sale of business assets in various states, state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance.
Net Income (Loss)
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Income (Loss) | $ | (20,005 | ) | $ | 329 | $ | 20,334 | (101.6 | )% | (31.2 | )% | 0.5 | % | |||||||||||
Net income increased by $20.3 million to $0.3 million for the three months ended September 30, 2020 compared to a net loss of $20.0 million during the same period of the prior year as described above.
Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019
The following factors affected our results of operations and cash flows for the nine months ended September 30, 2020 as compared to the same period of the prior year:
Acquisitions, Divestitures and Other Transactions
Based on the timing of these transactions, our consolidated financial statements for the nine months ended September 30, 2020 do not reflect the net revenues, operating expenses, depreciation and amortization expenses of the divested entities, whereas our consolidated financial statements for the nine months ended September 30, 2019 do reflect the net revenues, operating expenses, depreciation and amortization expenses of the divested entities. Likewise, our condensed consolidated financial statements for the nine months ended September 30, 2020 reflect the net revenues, operating expenses, depreciation and amortization expenses of acquired entities, whereas our condensed consolidated financial statements for the nine months ended September 30, 2019 do not reflect the net revenues, operating expenses, depreciation and amortization expenses of acquired entities.
On April 6, 2020, we sold radio station WBZW-AM and an FM translator construction permit in Orlando, Florida, for $0.2 million in cash.
On November 14, 2019, we sold nine radio stations, WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis, Missouri for $8.7 million in cash.
On September 26, 2019, we sold four radio stations, WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and WOCN-AM (formerly WKAT-AM) in Miami, Florida for $8.2 million in cash.
On September 18, 2019, we sold radio station WDYZ-AM (formerly WORL-AM) in Orlando, Florida for $0.9 million in cash.
On July 25, 2019, we acquired the Journeyboxmedia.com website and related assets for $0.5 million in cash.
On July 10, 2019 we acquired certain assets including a digital content library from Steelehouse Productions, Inc. for $0.1 million in cash.
On June 6, 2019, we acquired InvestmentHouse.com website and related financial newsletter assets for $0.6 million in cash.
On May 14, 2019, we sold radio station WSPZ-AM (previously WWRC-AM) in Washington D.C. for $0.8 million in cash. The buyer began programming the station on April 12, 2019 under a TBA.
On March 21, 2019, we sold Newport Natural Health for $0.9 million in cash.
On March 18, 2019, we acquired the pjmedia.com website for $0.1 million in cash.
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On February 28, 2019, we sold Mike Turner’s line of investment products, including TurnerTrends.com and other domain names and related assets. We received no cash from the buyer who assumed all deferred subscription liabilities for Mike Turner’s investment products.
On February 27, 2019, we sold HumanEvents.com, for $0.3 million in cash.
Debt Transactions
During the nine months ended September 30, 2020, we completed repurchases of $3.5 million of the Notes for $3.4 million in cash, recognizing a net gain of $49,000 after adjusting for bond issuance costs compared to repurchases of $6.7 million of the Notes for $6.1 million in cash, recognizing a net gain of $0.4 million after adjusting for bond issuance costs during the same period of the prior year as detailed in Note 13 – Long-Term Debt.
Equity Transactions
Distributions of $0.7 million ($0.025 per share) were declared and paid throughout the nine months ended September 30, 2020 based upon our Board’s then current assessment of our business compared to distributions of $3.4 million ($0.13 per share) on our common stock during the same period of the prior year as detailed in Note 18 – Equity Transactions.
Net Broadcast Revenue
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Broadcast Revenue | $ | 142,854 | $ | 130,041 | $ | (12,813 | ) | (9.0 | )% | 75.5 | % | 75.7 | % | |||||||||||
Same Station Net Broadcast Revenue | $ | 136,638 | $ | 127,641 | $ | (8,997 | ) | (6.6 | )% | |||||||||||||||
The following table shows the dollar amount and percentage of net broadcast revenue for each broadcast revenue source.
| Nine Months Ended September 30, | ||||||||||||||||
| 2019 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Block Programming: | ||||||||||||||||
National | $ | 36,517 | 25.5 | % | $ | 35,536 | 27.3 | % | ||||||||
Local | 22,867 | 16.0 | 18,211 | 14.0 | ||||||||||||
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| 59,384 | 41.5 | 53,747 | 41.3 | |||||||||||||
Broadcast Advertising: | ||||||||||||||||
National | 11,956 | 8.4 | 10,179 | 7.8 | ||||||||||||
Local | 38,467 | 26.9 | 28,630 | 22.0 | ||||||||||||
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| 50,423 | 35.3 | 38,809 | 29.8 | |||||||||||||
Station Digital (local) | 10,234 | 7.2 | 17,702 | 13.6 | ||||||||||||
Infomercials | 1,091 | 0.8 | 750 | 0.6 | ||||||||||||
Network | 13,923 | 9.7 | 13,505 | 10.4 | ||||||||||||
Other Revenue | 7,799 | 5.5 | 5,528 | 4.3 | ||||||||||||
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Net Broadcast Revenue | $ | 142,854 | 100.0 | % | $ | 130,041 | 100.0 | % | ||||||||
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Block programming revenue declined by $5.6 million, including a $4.6 million decline in local programming revenue and a $1.0 million decline in national programming revenue. The decline in local programming revenue includes a $2.1 million decline in revenue during 2020 as compared to 2019 for stations that were sold during 2019. The decline in national programming revenue includes $0.4 million decline in revenue during 2020 as compared to 2019 for stations that were sold during 2019 and $0.3 million of early payment discounts granted in exchange for advance cash payments. The remainder of the decline was due to certain programmers discontinuing their ministry efforts, sports programming that was cancelled due to the COVID-19 pandemic and an increase in competition from other broadcasters and from podcasts that resulted in lost programs and lower rates.
Advertising revenue, net of agency commissions, declined by $11.6 million, $12.5 million net of political, due to a $10.3 million decline in local advertising net of political and a $2.2 million decline in national advertising revenue net of political. Local advertising net of political, declined by $4.2 million on our Contemporary Christian Music format radio stations due to lower spot rates charged to compete with other broadcasters that offered lower rates, primarily in the Dallas, Atlanta and Los Angeles markets, $2.4 million on our Christian Teaching and Talk format radio stations and $1.9 million on our News Talk format radio stations. The remainder of the decline was due to the impact of stations sold during 2019 that have no activity during the nine months ended September 30, 2020 and the impact of the COVID-19 pandemic with several advertisers reducing or ceasing to advertise due to stay-at-home orders and limited capacity orders that have temporarily closed their businesses.
Station digital revenue, or local digital revenue generated from our radio stations and networks, increased by $7.5 million due to the growth of digital product offerings through Salem Surround, our national multimedia digital advertising agency providing digital marketing services to our customers. Our product offerings include social media campaigns, search engine optimization, retargeted advertising and other services intended to increase our market share as advertising dollars shift away from pure broadcast to include digital and digital technologies. In addition, we recently launched SalemNOW, an on-demandpay-per-view video steaming platform which contributed $4.0 million of the $7.5 million growth in revenue during the nine months ended September 30, 2020. There were no significant changes in digital rates as compared to the prior year.
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Declines in infomercial revenue were due to a reduction in the number of infomercials aired with no significant changes in rates as compared to the prior year. The placement of infomercials can vary significantly from one period to another due to the number of time slots available and the degree to which the infomercial content is considered to be of interest to our audience.
Network revenue, net of digital, decreased by $0.4 million due to a $1.2 million decline in national advertising revenue offset by a $0.8 million increase in political advertising.
Other revenue declined by $2.3 million due to a $1.6 million decrease in event revenue from the cancellation of live events due to the COVID-19 pandemic and a $0.7 million decrease in listener purchase program revenue from lower listener participation offset by a $0.2 million increase in tower rent revenue. Event revenue varies from period to period based on the nature and timing of events, audience demand, and in some cases, the weather, which can affect attendance.
On a Same Station basis, net broadcast revenue decreased $9.0 million, which reflects these items net of the impact of stations acquired, disposed of, or with format changes.
Net Digital Media Revenue
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Digital Media Revenue | $ | 29,349 | $ | 28,355 | $ | (994 | ) | (3.4 | )% | 15.5 | % | 16.5 | % | |||||||||||
The following table shows the dollar amount and percentage of net digital media revenue for each digital media revenue source.
| Nine Months Ended September 30, | ||||||||||||||||
| 2019 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Digital Advertising, net | $ | 15,136 | 51.6 | % | $ | 14,473 | 51.0 | % | ||||||||
Digital Streaming | 2,947 | 10.0 | 2,611 | 9.2 | ||||||||||||
Digital Subscriptions | 6,076 | 20.7 | 6,679 | 23.6 | ||||||||||||
Digital Downloads | 4,196 | 14.3 | 4,291 | 15.1 | ||||||||||||
e-commerce | 468 | 1.6 | 108 | 0.4 | ||||||||||||
Other Revenues | 526 | 1.8 | 193 | 0.7 | ||||||||||||
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Net Digital Media Revenue | $ | 29,349 | 100.0 | % | $ | 28,355 | 100.0 | % | ||||||||
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National digital advertising revenue, net of agency commissions, declined by $0.7 million including a $1.7 million decline from Salem Web Network that was offset by a $0.9 million net increase from our conservative opinion websites within Townhall Media and a $0.1 million increase from Eagle Financial Publications. The net increase from Townhall Media includes a $0.5 million increase from our March 2019 acquisition of pjmedia.com. Declines in national digital advertising are attributable to a loss of advertisers who moved advertising spending to digital programmatic advertisers, such as Facebook and Google, and to a loss of advertisers who reduced or eliminated advertising on political-content websites such as ours. We continue to acquire, develop and promote the use of mobile applications, particularly for our Christian mobile applications, to reduce our dependency on page views from digital programmatic advertisers. Because mobile page views carry fewer advertisements and tend to have shorter site visits as compared to desktop, our growth in mobile page views exceeds our growth in revenue from the mobile applications.
Digital streaming revenue decreased $0.3 million based on lower demand for content available from our Christian websites. There were no significant changes in sales volume or rates as compared to the prior year.
Digital subscription revenue increased $0.6 million including $0.7 million from Townhall VIP, a new service from Townhall Media, and $0.2 million from InvesmentHouse.com that was acquired in June 2019, offset by a $0.2 million decrease from Christianjobs.com and Churchstaffing.com within Salem Web Network and a $0.1 million net decrease in the number of subscribers to newsletters from Eagle Financial Publications.
Digital download revenue increased by $0.1 million from our church product websites, WorshipHouseMedia.com and SermonSpiceTM.com. There were no significant changes in rates as compared to the prior year.
E-commerce revenue decreased by $0.4 million due to the sale of Newport Natural Health, an e-commerce website operated by Eagle Wellness, on March 21, 2019.
Other revenue includes revenue sharing arrangements for mobile applications and mail list rentals. We recognized revenue of $0.2 million in 2019 related to transfer services provided to the buyer of Newport Natural Health. There were no changes in volume or rates as compared to the prior year.
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Net Publishing Revenue
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Publishing Revenue | $ | 17,062 | $ | 13,366 | $ | (3,696 | ) | (21.7 | )% | 9.0 | % | 7.8 | % | |||||||||||
The following table shows the dollar amount and percentage of net publishing revenue for each publishing revenue source.
| Nine Months Ended September 30, | ||||||||||||||||
| 2019 | 2020 | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Book Sales | $ | 13,638 | 79.9 | % | $ | 9,701 | 72.5 | % | ||||||||
Estimated Sales Returns & Allowances | (4,296 | ) | (25.2 | ) | (2,852 | ) | (21.3 | ) | ||||||||
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Net Book Sales | 9,342 | 54.7 | 6,849 | 51.2 | ||||||||||||
E-Book Sales | 1,232 | 7.2 | 960 | 7.2 | ||||||||||||
Self-Publishing Fees | 4,258 | 25.0 | 3,860 | 28.9 | ||||||||||||
Print Magazine Subscriptions | 581 | 3.4 | 519 | 3.9 | ||||||||||||
Print Magazine Advertisements | 474 | 2.8 | 278 | 2.1 | ||||||||||||
Digital Advertising | 290 | 1.7 | 216 | 1.6 | ||||||||||||
Other Revenue | 885 | 5.2 | 684 | 5.1 | ||||||||||||
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Net Publishing Revenue | $ | 17,062 | 100.0 | % | $ | 13,366 | 100.0 | % | ||||||||
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Net book sales declined by $2.5 million due to a lower volume of sales from Regnery® Publishing and Salem Author Services. Regnery® Publishing book sales reflect an 4% decrease in the average price per unit sold and a 30% decrease in volume due to a majority of book stores in the country being closed due to the COVID-19 pandemic and Amazon’s decision to prioritize the shipment of essential products over the shipment of books. Revenue from book sales through Regnery® Publishing are directly attributable to the number of titles released each period and the composite mix of titles available. Revenues vary significantly from period to period based on the book release date and the number of titles that achieve placement on bestseller lists, which can increase awareness and demand for the book. The decrease of $1.4 million to the estimated sales returns and allowances reflects the lower number of print books sold through Regnery® Publishing. The decline in book sales from Salem Author Services was due to authors choosing not to buy books because they could not be promoted at live events. There were no significant changes in sale prices as compared to the prior year.
Regnery® Publishing e-book sales decreased by $0.3 million with a 26% decrease in sales volume offset by a 7% increase in the average price per unit sold from sales incentives. E-book sales can also vary based on the composite mix of titles released and available in each period. Revenues vary significantly based on the book release date and the number of titles that achieve placement on bestseller lists, which can increase awareness and demand for the book.
Self-publishing fees decreased $0.4 million due a decline in the number of authors with rates charged that were comparable to the prior year.
Declines in print magazine subscription revenues and advertising revenues reflect lower consumer demand and distribution levels. There were no significant changes in rates over the prior year.
Digital adverting revenue from Regnery® Publishing websites declined due to a lower demand due to the COVID-19 pandemic and the ongoing closure of bookstores with rates comparable to the same period of the prior year.
Other revenue includes change fees, video trailers, and subright revenue for foreign translation and audio books for original published titles from Regnery® Publishing. Subright revenue declined $0.2 million due to lower demand.
Broadcast Operating Expenses
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Broadcast Operating Expenses | $ | 111,466 | $ | 104,704 | $ | (6,762 | ) | (6.1 | )% | 58.9 | % | 61.0 | % | |||||||||||
Same Station Broadcast Operating Expenses | $ | 104,291 | $ | 101,972 | $ | (2,319 | ) | (2.2 | )% | |||||||||||||||
Broadcast operating expenses decreased by $6.8 million including $9.2 million in savings from cost reduction initiatives and $5.1 million in expense savings from stations sold during the prior year that were offset with an $7.5 million increase in costs from Salem Surround and SalemNOW. We implemented several cost cutting measures in response to the economic impact of the COVID-19 pandemic that resulted in a $5.5 million reduction in employee-related costs from temporary pay cuts, layoffs and furloughs, a $2.5 million decline in discretionary advertising spending, a $1.7 million decline in event costs, a $1.2 million decline in travel and entertainment expenses, a $0.4 million decline in non-cash stock-based compensation associated with restricted stock awards, a $0.2 million decline in facility-related expenses, a $0.2 million decline in professional services fees, a $0.2 million decline in music license fees and a $0.1 million decline in production and programming expense that was partially offset by a $1.9 million increase in bad debt expense, including the additional reserve of $1.1 million recorded at March 31, 2020 due to the impact on collections of the economic uncertainties from the COVID-19 pandemic.
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On a same-station basis, broadcast operating expenses decreased by $2.3 million. The decrease in broadcast operating expenses on a same station basis reflects the above described items net of the impact of start-up costs associated with station acquisitions, format changes and station dispositions.
Digital Media Operating Expenses
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Digital Media Operating Expenses | $ | 22,988 | $ | 23,123 | $ | 135 | 0.6 | % | 12.1 | % | 13.5 | % | ||||||||||||
The increase in digital media operating expenses of $0.1 million includes a $0.4 million increase in professional services, a $0.4 million increase in cost of sales, a $0.2 million increase in facility-related expenses, and a $0.1 million increase in advertising and promotional expenses, offset by a $0.6 million decrease in support and streaming fees from vendor concessions, a $0.2 million decrease in employee-related expenses due to temporary pay cuts and a $0.1 million decrease in royalty expense. The increases in advertising and promotion reflect start-up costs from the launch of Townhall VIP, a premium subscription service.
Publishing Operating Expenses
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Publishing Operating Expenses | $ | 17,112 | $ | 16,443 | $ | (669 | ) | (3.9 | )% | 9.0 | % | 9.6 | % | |||||||||||
Publishing operating expenses decreased by $0.7 million, including a $0.7 million decrease in payroll-related costs and a $1.4 million decrease in the cost of goods sold that included a $0.8 million decrease from print books sold by Regnery® Publishing, a $0.5 million decline from Salem Author Services due to a lower volume of book sales and a $0.1 million decrease from Salem Publishing, that was offset by a $0.7 million increase in bad debt expense and a $0.7 million increase in royalty expense reflecting an increase in the reserve for royalty advances based on lower sales. The gross profit margin for Regnery® Publishing was 41% for the nine months ended September 30, 2020 as compared to 57% for the same period of the prior year as sales volume decreased greater than material costs savings. Regnery® Publishing margins vary based on the volume of e-book sales, which have higher margins due to the nature of delivery and no reserve for sales returns and allowances. The gross profit margin for Salem Author Services improved to 72% from 68% due to lower paper costs for print book sales.
Unallocated Corporate Expenses
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Unallocated Corporate Expenses | $ | 12,386 | $ | 11,909 | $ | (477 | ) | (3.9 | )% | 6.5 | % | 6.9 | % | |||||||||||
Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax and treasury, that are not directly attributable to any one of our operating segments. The decrease of $0.5 million includes a $0.6 million decrease in non-cash stock-based compensation associated with restricted stock awards and a $0.3 million decrease in payroll-related expenses due to company-wide implementation of pay cuts partially offset by travel and entertainment-related expenses due to market visits prior to the travel restrictions from the COVID-19 pandemic offset by a $0.3 million increase employee-related benefits associated with the cash surrender value of split dollar life insurance and a $0.1 million increase in professional services.
Depreciation Expense
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
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| % of Total Net Revenue | ||||||||||||||||||||||
Depreciation Expense | $ | 8,529 | $ | 8,108 | $ | (421 | ) | (4.9 | )% | 4.5 | % | 4.7 | % | |||||||||||
The decrease in depreciation expense reflects the impact of prior year capital expenditures for data processing equipment and computer software that were fully depreciated during the current year. There were no changes in our depreciation methods or in the estimated useful lives of our asset groups.
Amortization Expense
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2019 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Amortization Expense | $ | 3,567 | $ | 2,578 | $ | (989 | ) | (27.7 | )% | 1.9 | % | 1.5 | % | |||||||||||
The decrease in amortization expense reflects the impact of fully amortized domain names, customer lists and contracts, and subscriber base lists that were fully amortized at or near the beginning of the 2020 calendar year resulting in lower amortization expense for this year. There were no changes in our amortization methods or the estimated useful lives of our intangible asset groups.
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Change in the Estimated Fair Value of Contingent Earn-Out Consideration
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Change in the Estimated Fair Value of Contingent Earn-Out Consideration | $ | (40 | ) | $ | (12 | ) | $ | 28 | (70.0 | )% | — | % | — | % | ||||||||||
Acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. We review the probabilities of possible future payments to estimate the fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable.
Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill | $ | 1,915 | $ | 17,254 | $ | 15,339 | 801.0 | % | 1.0 | % | 10.0 | % | ||||||||||||
We performed an interim review of broadcast licenses for certain markets during the three months ended March 31,first quarter of 2020 due to themastheads.mastheads during our interim review in the first quarter of 2020. These impairments were driven by decreases in projected revenues due to the current estimated impact of
We performed an There were no indications of impairment as of our interim review during the second quarter of certain broadcast licenses in September 2019 based on market revenues that were trending below the forecasted amounts used in our 2018 year-end valuations. We recorded an impairment charge of $1.9 million in our Louisville, Philadelphia, Portland and San Francisco markets.
2020.
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Impairment of Goodwill | $ | — | $ | 307 | $ | 307 | 100.0 | % | — | % | 0.2 | % | ||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Impairment of Goodwill | $ | 307 | $ | — | $ | (307 | ) | (100.0 | )% | 0.3 | % | — | % | |||||||||||
There were no indications of impairment as of our interim review during the second quarter of 2020.
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net (Gain) Loss on the Disposition of assets | $ | 21,212 | $ | 1,494 | $ | (19,718 | ) | (93.0 | )% | 11.2 | % | 0.9 | % | |||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net (Gain) Loss on the Disposition of assets | $ | 113 | $ | 55 | $ | (58 | ) | (51.3 | )% | 0.1 | % | — | % | |||||||||||
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Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis, Missouri, the $4.7 million pre-tax loss from the sale of radio stations WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and WOCN-AM (formerly WKAT-AM) in Miami, Florida, a $3.8 million pre-tax loss on the sale of radio station WSPZ-AM in Washington, D.C., a $1.6 million pre-tax loss from the sale of radio station WDYZ-AM (formerly WORL-AM) in Orlando, Florida, a $1.3 million pre-tax loss on the exchange of radio station KKOL-AM in Seattle, Washington for KPAM-AM in Portland, Oregon, a $0.2 million pre-tax loss on the sale Mike Turner’s line of investment products and a $0.2 million pre-tax loss on the sale of HumanEvents.com that was partially offset by a $0.4 million pre-tax gain on the sale of a portion of land on our transmitter site in Miami, Florida and a $0.1 million pre-tax gain on the sale of Newport Natural Health.
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Interest Income | $ | 1 | $ | 1 | $ | — | — | % | — | % | — | % | ||||||||||||
Interest Expense | (13,206 | ) | (12,069 | ) | 1,137 | (8.5 | )% | (7.0 | )% | (7.0 | )% | |||||||||||||
Gain on Early Retirement of Long-Term Debt | 426 | 49 | (377 | ) | (88.5 | )% | 0.2 | % | — | % | ||||||||||||||
Net Miscellaneous Income and (Expenses) | 19 | (45 | ) | (64 | ) | (336.8 | )% | — | % | — | % | |||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Interest Income | $ | — | $ | 1 | $ | 1 | 100.0 | % | — | % | — | % | ||||||||||||
Interest Expense | (8,045 | ) | (7,861 | ) | (184 | ) | (2.3 | )% | (7.2 | )% | (6.4 | )% | ||||||||||||
Gain on Early Retirement of Long-Term Debt | 49 | — | (49 | ) | (100.0 | )% | — | % | — | % | ||||||||||||||
Net Miscellaneous Income and (Expenses) | (46 | ) | 85 | 131 | (284.8 | )% | — | % | 0.1 | % | ||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Provision for (Benefit from) Income Taxes | $ | 30,779 | $ | (358 | ) | $ | (31,137 | ) | (101.2 | )% | 27.7 | % | (0.3 | )% | ||||||||||
Net miscellaneous income and expenses includes non-operating receipts such as usage fees and other miscellaneous expenses.
Provision for Income Taxes
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Provision for Income Taxes | $ | 697 | $ | 31,180 | $ | 30,483 | 4,373.5 | % | 0.4 | % | 18.2 | % | ||||||||||||
Our provision for income taxes increased by $30.5 million to $31.2 million for the nine months ended September 30, 2020 compared to $0.7 million for the same period of the prior year. As a result of our adjusted cumulative three-year pre-tax book loss as of September 30, 2020, we performed quarterly assessments of positive and negative evidence with respect to the realization of our net deferred tax assets. An additional valuation allowance of $37.1 million was recorded in the period ended March 31, 2020, which was reduced by $0.3 million in the period ended June 30, 2020, for a total valuation allowance of $49.8 million for the period ended September 30, 2020. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate was (119.0)(16.1)% for the ninesix months ended SeptemberJune 30, 20202021 compared to (3.1)(114.3)% for the same period of the prior year. The effective tax rate for each period differs from the federal statutory income rate of 21.0% due to the effect of the sale of business assets in various states, state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance. The effective tax rate of (119.0%)(16.1)% is driven by increases in the valuation allowancecertain expenses that are nondeductible for income tax purposes relative to
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2019 | 2020 | Change $ | Change % | 2019 | 2020 | |||||||||||||||||||
| (Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Loss | $ | (23,327 | ) | $ | (57,390 | ) | $ | (34,063 | ) | 146.0 | % | (12.3 | )% | (33.4 | )% | |||||||||
Income (Loss)
Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2021 | Change $ | Change % | 2020 | 2021 | |||||||||||||||||||
(Dollars in thousands) | % of Total Net Revenue | |||||||||||||||||||||||
Net Income (Loss) | $ | (57,719 | ) | $ | 2,580 | $ | 60,299 | (104.5 | )% | (51.9 | )% | 2.1 | % | |||||||||||
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probabilities associated with the potential for contingent earn-out consideration;
Given the decreases in revenue caused by the COVID-19 pandemic, we assessed a variety of factors, including media industry forecasts, expected operating results, forecasted net cash flows from operations, future obligations and liquidity, and capital expenditure commitments. We concluded that the potential that we could incur a considerable decrease in operating income and the resulting impact on our ability to fund interest payments on our debt, were probable conditions which gave rise to a need for an assessment of whether substantial doubt existed of our ability to continue as a going concern.
We reforecast our anticipated results extending through November 2021. Our reforecast includes the impact of certain cost-cutting measures associated with reductions in staffing, reductions in commissions and royalty expenses based on lower revenue forecasts, reductions in travel and entertainment expenses due to stay-at-home mandates, reductions in event costs, company-wide pay cuts, furloughs of certain employees that are non-essential at this time, and the temporary suspension of the company 401K match. We are considering sales-leaseback of owned facilities if the adverse economic impact of the COVID-19 pandemic continues beyond 2020. Based on our current assessment, we believe that we have the ability to meet our obligations as they come due for one year from the issuance of the financial statements.
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| (1) | the difference between any recent fair value calculations and the carrying value; |
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| (2) | financial performance, such as station operating income, including performance as compared to projected results used in prior estimates of fair value; |
| (3) | macroeconomic economic conditions, including limitations on accessing capital that could affect the discount rates used in prior estimates of fair value; |
| (4) | industry and market considerations such as a decline in market-dependent multiples or metrics, a change in demand, competition, or other economic factors; |
| (5) | operating cost factors, such as increases in labor, that could have a negative effect on future expected earnings and cash flows; |
| (6) | legal, regulatory, contractual, political, business, or other factors; |
| (7) | other relevant entity-specific events such as changes in management or customers; and |
| (8) | any changes to the carrying amount of the indefinite-lived intangible asset. |
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Contingent Earn-Out Consideration
Our acquisitions often include contingent earn-out consideration as part of the purchase price. The fair value of the contingent earn-out consideration is estimated as of the acquisition date based on the present value of the contingent payments expected to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent earn-out consideration include our own assumptions about the likelihood of payment based on the established benchmarks and discount rates based on our internal rate of return analysis. The fair value measurements include inputs that are Level 3 measurement as discussed in Note 14 in the notes of our Condensed Consolidated Financial Statements contained in Part 1 in this quarterly report on Form 10-Q.
We review the probabilities of possible future payments to the estimated fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results increase or decrease as compared to the assumption used in our analysis, the fair value of the contingent earn-out consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent earn-out consideration could cause a material impact and volatility in our operating results. During the nine months ended September 30, 2020, we recorded a net decrease of $12,000 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for this period. The changes in our estimates reflect volatility from variables, such as revenue growth, page views and session time as discussed in Note 4 – Contingent Earn-Out Consideration in the notes to our Condensed Consolidated Financial Statements contained in Part 1 of this quarterly report on Form 10-Q.
We believe that we have used reasonable estimates and assumptions to calculate the estimated fair value of all remaining contingent earn-out consideration however, these estimates and assumptions are highly judgmental in nature. Actual results can be materially different from estimates and assumptions.
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We believe that we have used reasonable estimates and assumptions to calculate the estimated fair value of our financial assets as discussed in Note 1412 in the notes to our Condensed Consolidated Financial Statements contained in Part 1 of this quarterly report on Form
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advance remains outstanding, the less likely it is that we will recover the advance through the sale of the book. We apply this historical experience to outstanding royalty advances to estimate the likelihood of recovery. A provision was established to expense the balance of any unearned advance which we believe is not recoverable. Our analysis also considers other discrete factors, such as death of an author, any decision to not pursue publication of a title, poor market demand or other relevant factors. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.
63
64
entities and networks. Corporate ROU assets are tested on a consolidated level with consideration given to all cash flows of the company as corporate functions do not generate cash flows and are funded by revenue-producing activities at lower levels of the entity.
65
2021.
As a result of our adjusted cumulative three-year pre-tax book loss as of September 30, 2020, we performed quarterly assessments of positive and negative evidence with respect to the realization of our net deferred tax assets. This assessment includes the evaluation of scheduled reversals of deferred tax liabilities, the availability of carryforwards and estimates of projected future taxable income. The economic uncertainty from the COVID-19 pandemic provided additional negative evidence that outweighed positive evidence resulting in our conclusion that additional deferred tax assets of $36.8 million related to federal and state net operating loss carryforwards are more likely than not to be not realized. As such, an additional valuation allowance of $37.1 million was recorded in the period ended March 31, 2020, which was reduced by $0.3 million in the period ended June 30, 2020, for a total valuation allowance of $49.8 million for the period ended September 30, 2020. We recorded an out-of-period adjustment of $1.5 million as of June 30, 2020 due to a change in our annual effective tax rate which should have been recorded in the quarter ended March 31, 2020.
66
In
Future Our businesses could also continue to be impacted by the disruptions from
offering extended payment terms of up to 90 days to limit cancellations and entice new business;
considering sales-leaseback of owned facilities; and
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees.
and we may be entitled to benefits under the deferralCAA based on our individual locations, including:
We reforecast our anticipated results extending through November 2021. Our reforecast includes
67
We continue to review and consider any available potential benefit under the CARES Act for which we qualify. We cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. If the U.S. government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.
The ultimate impact of these disruptions, including the extent of their adverse impact on our financial and operating results, will be affected by the length of time that such disruptions continue, which will, in turn, depend on the currently unknown duration of the COVID-19 pandemic and the impact of governmental regulations and other restrictions that have been or may be imposed in response to the pandemic. Our businesses could also continue to be impacted by the disruptions from COVID-19 and resulting adverse changes in advertising customers and consumer behavior.
Generally, we keepkept the balance of cash and cash equivalents
expenses.
We collected $8.5 million of cash-in-advance payments that will result in early-payment discounts of 5% or $0.4 million throughout 2020;
We offered payment termsan increase of up to 90 days to limit cancellations and entice new business that may increase DSO’s in future periods;
We have deferred $2.2$68.9 million during the same period of the employer portionprior year; and
We withheld $0.3 million of rent payments that are included in current lease liabilities at September 30, 2020 pending rent concession negotiations;
We deferred cash payments for leases of $0.6 million at September 30, 2020 that are included in short-term and long-term operating lease liabilities based on negotiated repayment terms that range from October 2020 through December 2024; and
We reduced cash paid for leases by $0.3 million at September 30, 2020 due to rent abatements achieved.
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In recent years, we entered acquisition agreements that contain contingent earn-out arrangements that are payable in the future based on the achievement of predefined operating results. We believe that these contingent earn-out arrangements provide some degree of protection with regard to our cash outflows should these acquisitions not meet our operational expectations.
We undertake projects from time to time to upgrade our radio station technical facilities and/or FCC broadcast licenses, expand our digital and20202021 budget, we plannedplan to incur additional capital expenditures of approximately $0.9$3.9 million during the remainder of 2020. As noted, we are currently limiting capital expenditures to that of emergency-only type expenses.
2021.
Cash
We have used the PPP loans for eligible purposes and are applying for loan forgiveness based on the terms. During July 2021, the SBA forgave all but $20,000 of the PPP loans.
A $2.7 million decrease in cash used to repurchase a portion$3.5 million in face value of the 6.75% Senior Secured Notes to $3.4 million from $6.1 million;during the same period of the prior year; and
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The indenture relating to the Notes (the “Indenture”) contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets.
Date | Principal Repurchased | Cash Paid | % of Face Value | Bond Issue Costs | Net Gain | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
January 30, 2020 | $ | 2,250 | $ | 2,194 | 97.50 | % | $ | 34 | $ | 22 | ||||||||||
January 27, 2020 | 1,245 | 1,198 | 96.25 | % | 20 | 27 | ||||||||||||||
December 27, 2019 | 3,090 | 2,874 | 93.00 | % | 49 | 167 | ||||||||||||||
November 27, 2019 | 5,183 | 4,548 | 87.75 | % | 82 | 553 | ||||||||||||||
November 15, 2019 | 3,791 | 3,206 | 84.58 | % | 61 | 524 | ||||||||||||||
March 28, 2019 | 2,000 | 1,830 | 91.50 | % | 36 | 134 | ||||||||||||||
March 28, 2019 | 2,300 | 2,125 | 92.38 | % | 42 | 133 | ||||||||||||||
February 20, 2019 | 125 | 114 | 91.25 | % | 2 | 9 | ||||||||||||||
February 19, 2019 | 350 | 319 | 91.25 | % | 7 | 24 | ||||||||||||||
February 12, 2019 | 1,325 | 1,209 | 91.25 | % | 25 | 91 | ||||||||||||||
January 10, 2019 | 570 | 526 | 92.25 | % | 9 | 35 | ||||||||||||||
December 21, 2018 | 2,000 | 1,835 | 91.75 | % | 38 | 127 | ||||||||||||||
December 21, 2018 | 1,850 | 1,702 | 92.00 | % | 35 | 113 | ||||||||||||||
December 21, 2018 | 1,080 | 999 | 92.50 | % | 21 | 60 | ||||||||||||||
November 17, 2018 | 1,500 | 1,357 | 90.50 | % | 29 | 114 | ||||||||||||||
May 4, 2018 | 4,000 | 3,770 | 94.25 | % | 86 | 144 | ||||||||||||||
April 10, 2018 | 4,000 | 3,850 | 96.25 | % | 87 | 63 | ||||||||||||||
April 9, 2018 | 2,000 | 1,930 | 96.50 | % | 43 | 27 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| $ | 38,659 | $ | 35,586 | $ | 706 | $ | 2,367 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Date | Principal Repurchased | Cash Paid | % of Face Value | Bond Issue Costs | Net Gain | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
January 30, 2020 | $ | 2,250 | $ | 2,194 | 97.50 | % | $ | 34 | $ | 22 | ||||||||||
January 27, 2020 | 1,245 | 1,198 | 96.25 | % | 20 | 27 | ||||||||||||||
December 27, 2019 | 3,090 | 2,874 | 93.00 | % | 48 | 167 | ||||||||||||||
November 27, 2019 | 5,183 | 4,548 | 87.75 | % | 82 | 553 | ||||||||||||||
November 15, 2019 | 3,791 | 3,206 | 84.58 | % | 61 | 524 | ||||||||||||||
March 28, 2019 | 2,000 | 1,830 | 91.50 | % | 37 | 134 | ||||||||||||||
March 28, 2019 | 2,300 | 2,125 | 92.38 | % | 42 | 133 | ||||||||||||||
February 20, 2019 | 125 | 114 | 91.25 | % | 2 | 9 | ||||||||||||||
February 19, 2019 | 350 | 319 | 91.25 | % | 7 | 24 | ||||||||||||||
February 12, 2019 | 1,325 | 1,209 | 91.25 | % | 25 | 91 | ||||||||||||||
January 10, 2019 | 570 | 526 | 92.25 | % | 9 | 35 | ||||||||||||||
December 21, 2018 | 2,000 | 1,835 | 91.75 | % | 38 | 127 | ||||||||||||||
December 21, 2018 | 1,850 | 1,702 | 92.00 | % | 35 | 113 | ||||||||||||||
December 21, 2018 | 1,080 | 999 | 92.50 | % | 21 | 60 | ||||||||||||||
November 17, 2018 | 1,500 | 1,357 | 90.50 | % | 29 | 114 | ||||||||||||||
May 4, 2018 | 4,000 | 3,770 | 94.25 | % | 86 | 144 | ||||||||||||||
April 10, 2018 | 4,000 | 3,850 | 96.25 | % | 87 | 63 | ||||||||||||||
April 9, 2018 | 2,000 | 1,930 | 96.50 | % | 43 | 27 | ||||||||||||||
| $ | 38,659 | $ | 35,586 | $ | 706 | $ | 2,367 | |||||||||||||
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with the net proceeds from the Notes offering, to repay outstanding borrowings under our previously existing senior credit facilities, and related fees and expenses. Current proceeds from the ABL Facility are used to provide ongoing working capital and for other general corporate purposes, including permitted acquisitions.
We amended
| As of December 31, 2019 | As of September 30, 2020 | |||||||
| (Dollars in thousands) | ||||||||
6.75% Senior Secured Notes | $ | 219,836 | $ | 216,341 | ||||
| Less unamortized debt issuance costs based on imputed interest rate of 7.08% | (3,368 | ) | (2,761 | ) | ||||
|
|
|
| |||||
6.75% Senior Secured Notes net carrying value | 216,468 | 213,580 | ||||||
|
|
|
| |||||
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| December 31, 2020 | June 30, 2021 | |||||||
(Dollars in thousands) | ||||||||
6.75% Senior Secured Notes | $ | 216,341 | $ | 216,341 | ||||
Less unamortized debt issuance costs based on imputed interest rate of 7.08% | (2,577 | ) | (2,209 | ) | ||||
6.75% Senior Secured Notes net carrying value | 213,764 | 214,132 | ||||||
Asset-Based Revolving Credit Facility principal outstanding | 5,000 | — | ||||||
SBA Paycheck Protection Program loans | — | 11,195 | ||||||
Long-term debt less unamortized debt issuance costs | $ | 218,764 | $ | 225,327 | ||||
Less current portion | (5,000 | ) | — | |||||
Long-term debt less unamortized debt issuance costs, net of current portion | $ | 213,764 | $ | 225,327 | ||||
Asset-Based Revolving Credit Facility principal outstanding | 12,426 | 16,600 | ||||||
|
|
|
| |||||
Long-term debt less unamortized debt issuance costs | $ | 228,894 | $ | 230,180 | ||||
|
|
|
| |||||
Less current portion | (12,426 | ) | (16,600 | ) | ||||
|
|
|
| |||||
Long-term debt less unamortized debt issuance costs, net of current portion | $ | 216,468 | $ | 213,580 | ||||
|
|
|
|
$16.6 million under the ABL Facility, with interest spread ranging from Base Rate plus 0.50% to 1.00% for base rate borrowings and LIBOR plus 1.50% to 2.00% for LIBOR borrowings;
| Amount | ||||
| For the Year Ended September 30, | (Dollars in thousands) | |||
2021 | $ | 16,600 | ||
2022 | — | |||
2023 | — | |||
2024 | 216,341 | |||
2025 | — | |||
Thereafter | — | |||
|
| |||
| $ | 232,941 | |||
|
| |||
Amount | ||||
For the Year Ended June 30, | (Dollars in thousands) | |||
2022 | $ | — | ||
2023 | — | |||
2024 | 216,341 | |||
2025 | — | |||
2026 | 11,195 | |||
Thereafter | — | |||
| $ | 227,536 | |||
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Exhibit Number | Exhibit Description | Form | File No. | Date of First Filing |
|
| ||||||||||||||||
| 31.1 | Certification of Edward G. Atsinger III Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act. | — | — | — | — | X | ||||||||||||||||
| 31.2 | Certification of Evan D. Masyr Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act. | — | — | — | — | X | ||||||||||||||||
| 32.1 | Certification of Edward G. Atsinger III Pursuant to 18 U.S.C. Section 1350. | — | — | — | — | X | ||||||||||||||||
| 32.2 | Certification of Evan D. Masyr Pursuant to 18 U.S.C. Section 1350. | — | — | — | — | X | ||||||||||||||||
| 101 | The following financial information from the Quarterly Report on Form 10Q for the three and | — | — | — | — | X | ||||||||||||||||
| 104 | The cover page of this Quarterly Report on Form 10-Q, formatted in inline XBRL. | |||||||||||||||||||||
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Edward G. Atsinger III SALEM MEDIA GROUP, INC. November 12, 2020By: /s/ EDWARD G. ATSINGER III By: /s/ EDWARD G. ATSINGER IIIChief Executive Officer(Principal Executive Officer)November 12, 2020 Chief Executive Officer (Principal Executive Officer) August 4, 2021 By: /s//s/ EVAN D. MASYR Evan D. Masyr Executive Vice President and Chief Financial Officer (Principal Financial Officer) 74