2020 Annual Report
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2020 Annual Report 2020 Annual Letter To our fellow shareholders: 2020, what can I say, it was an awful and disruptive year. There is nothing that I can tell you that you probably don’t know already. We do not really know the genesis of the cause but we most certainly know the effects. It was frustrating and scary. There was no real direction other than “follow the science” and even then, there were many camps that said “We are the science…follow us” …and other camps that said “No, they don’t understand the science…we do…. follow us”. During all this broadcasting was supposed to remain calm, do its duty and be honest, supportive, respectable, and responsible. Not all media followed this mantra, but radio broadcasters did. We, radio, seized this moment and concentrated on being a support for our communities. We were responsible for accurate local information. We were responsible for keeping the spirits high during the fog of day and night. Fortunately, we are radio, and our listeners could not see us sweat as we navigated the shoals of the pandemic. It injured us financially, but we never left the battlefield of professionalism. We reinforced our flotilla of stations so that they would not be in peril. We did not lose money, nor burn even one dollar of our cash during this time. Income, yes, we lost a lot…. but what we lost we replaced in pride of a job well done. Saga survived the punch but gave back to our communities the love, laughter, information and support that radio can provide. May we never see 2020 or its remnants again. What you will hear are the sounds of a confident and survived industry that learned many lessons during the darkness and came out with a deeper understanding of its mission. Saga and our radio stations stand on guard for our cities, states, and nation. I usually talk about individual station accomplishments, but not this time. We pulled it tight, stayed on mission and did it well. However, there is always a bill to pay, and the following is an update of 2020. Net Revenue for the year was $95.8 million with station operating income of $20.4 million. Free cash flow was $7.6 million. Net revenue declined 35.3% between the first and second quarter with the onset of the pandemic. From the initial low point net revenue steadily improved with an increase of 43.2% between the second and third quarter and 19.1% between the third and fourth quarter. Saga continues to maintain a very strong balance sheet with $51.4 million cash on hand at the end of the year with $10 million in outstanding bank debt. Let me just end this letter by saying that after Q1 of 2021, we see a sense of normalcy returning to our economy and the businesses and services that rely on us for their forward momentum. Sincerely, Ed Christian UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark one) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period for to Commission file number 1-11588 SAGA COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Florida 38-3042953 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 73 Kercheval Avenue Grosse Pointe Farms, Michigan 48236 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (313) 886-7070 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Class A Common Stock, $.01 par value SGA NASDAQ Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated Non-accelerated filer Smaller Reporting Emerging growth company filer Company ☐ ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No Aggregate market value of the Class A Common Stock and the Class B Common Stock (assuming conversion thereof into Class A Common Stock) held by nonaffiliates of the registrant, computed on the basis of the closing price of the Class A Common Stock on June 30, 2020 on the NASDAQ: $127,731,661. The number of shares of the registrant’s Class A Common Stock, $.01 par value, and Class B Common Stock, $.01 par value, outstanding as of March 4, 2021 was 5,042,752 and 937,641, respectively. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the 2021 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company’s fiscal year) are incorporated by reference in Part III hereof. Saga Communications, Inc. 2020 Form 10-K Annual Report Table of Contents Page PART I Item 1. Business ........................................................................... 4 Item 1A. Risk Factors ........................................................................ 25 Item 1B. Unresolved Staff Comments .......................................................... 31 Item 2. Properties .......................................................................... 31 Item 3. Legal Proceedings ................................................................... 31 Item 4. Mine Safety Disclosures .............................................................. 32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .................................................................... 32 Item 6. Selected Financial Data .............................................................. 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ....... 37 Item 7A. Quantitative and Qualitative Disclosures about Market Risk ................................ 49 Item 8. Financial Statements and Supplementary Data ............................................ 49 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....... 49 Item 9A. Controls and Procedures .............................................................. 49 Item 9B. Other Information ................................................................... 52 PART III Item 10. Directors, Executive Officers and Corporate Governance ................................... 52 Item 11. Executive Compensation ............................................................. 52 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ............................................................................ 52 Item 13. Certain Relationships and Related Transactions, and Director Independence ................... 52 Item 14. Principal Accountant Fees and Services ................................................. 52 PART IV Item 15. Exhibits and Financial Statement Schedules .............................................. 53 Signatures.................................................................................... 87 2 Forward-Looking Statements Statements contained in this Form 10-K that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “estimates,” “plans,” “expects”, “guidance,” and similar expressions are intended to identify forward-looking statements. These statements are made as of the date of this report or as otherwise indicated, based on current expectations. We undertake no obligation to update this information. A number of important factors could