Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

12. Commitments and Contingencies

Leases

We lease certain land, buildings and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use ("ROU") assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets are limited to the expected lease term. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. As of December 31, 2022, we do not have any non-cancellable operating lease commitments that have not yet commenced.

ROU assets are classified within other intangibles, deferred costs and investments, net on the condensed consolidated balance sheet while current lease liabilities are classified within other accrued expenses and long-term lease liabilities are classified within other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets were $6.5 million and $6.1 million at December 31, 2022 and 2021, respectively. Lease liabilities were $6.8 million and $6.4 million at December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, we recorded additional ROU assets under operating leases of $2,279,000, which is a non-cash transaction. Payments on lease liabilities during the year ended December 31, 2022 and 2021 totaled $1,797,000 and $1,777,000,respectively.

Lease expense includes cost for leases with terms in excess of one year. For the years ended December 31, 2022, 2021 and 2020, our total lease expense was $1,807,000, $1,765,000 and $1,752,000, respectively. Short-term lease costs are de minimus.

We have no financing leases and minimum annual rental commitments under non-cancellable operating leases consisted of the following at December 31, 2022 (in thousands):


Years Ending December 31,
2023	$	1,829
2024		1,696
2025		1,302
2026		1,071
2027		870
Thereafter		1,225
Total lease payments (a)		7,993
Less: Interest (b)		1,165
Present value of lease liabilities (c)	$	6,828

(a)	Lease payments include options to extend lease terms that are reasonably certain of being exercised. There were no legally binding minimum lease payments for leases signed but not yet commenced at December 31, 2022.

(b)	Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.

(c)	The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.3 years and 4.8%, respectively, at December 31, 2022.

Performance Fees and Royalties

We incur fees from performing rights organizations (“PRO”) to license our public performance of the musical works contained in each PRO’s repertory. The Radio Music Licensing Committee (“RMLC”), of which we are a represented participant, (1) entered into an Interim License Agreement with American Society of Composers, Authors and Publishers that was effective January 1, 2022 and will remain in effect until the date on which the parties reached agreement as to, or there is court determination of, new interim or final fees, terms, and conditions of a new license for the five year period commencing on January 1, 2022 and concluding on December 31, 2026; (2) is negotiating and will enter into, on behalf of the participating members, an Interim License Agreement with Broadcast Music, Inc.; (3) reached an agreement with the Society of European Stage Authors and Composers that is retroactive to January 1, 2016; and (4) in January 2022, RMLC and Global Music Rights (“GMR”) reach a conditional settlement of the GMR-RMLC antitrust and/or unfair competition litigations and we have entered into an agreement with GMR.

To secure the rights to stream music content over the Internet, we also must obtain performance rights licenses and pay public performance royalties to copyright owners of sound recordings (typically, performing artists and record companies). We pay the applicable royalty rates to SoundExchange, the organization designated by the Copyright Royalty Board (“CRB”) to collect and distribute royalties under these statutory licenses. From time to time, SoundExchange notifies us that certain calendar years are subject to routine audits of our royalty payments. The results of such audits could result in higher royalty payments for the subject years. There is no guarantee that the licenses and associated royalty rates that currently are available to us will be available to us in the future. In addition, Congress may consider and adopt legislation that would require us to pay royalties to sound recording copyright owners for broadcasting those recordings on our terrestrial radio stations.

Contingencies

In 2003, in connection with our acquisition of one FM radio station, WJZK-FM serving the Columbus, Ohio market, we entered into an agreement whereby we would pay the seller up to an additional $1,000,000 if we obtain approval from the FCC for a city of license change.