Edward Christian - President and Chief Executive Officer Samuel Bush - Senior Vice President, Treasurer, and Chief Financial Officer

Ladies and gentlemen, thank you for standing by and welcome to the Saga Communications First Quarter Results Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host, Mr. Ed Christian, President and CEO. Please go ahead, sir.

Thank you, Wilma. Good morning, everybody, welcome to our call. It should be somewhat brief one this morning. But as usual, we will have the introduction and the financial information from Sam Bush.

Thank you, Ed. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial measures. Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data table. During the first quarter, free cash flow increased 5.2% to $3.6 million, up from $3.4 million for the same period last year. Net revenues decreased slightly, $362,000, to $29.1 million. Station operating expenses decreased $182,000 to $22.8 million primarily due to decreases attributable to healthcare costs, the sale of four of our five networks, and a slight increase in licensing fees. National accounted for approximately 11.4% of gross revenue for the quarter compared to 13.1% last year. Gross political revenue for the quarter was $125,000 compared to $271,000 for the same period last year. Radio was $125,000 this quarter versus $211,000 last year. Television had no political this quarter compared to $60,000 last year. During the quarter we declared a quarterly cash dividend of $0.20 per share that was paid on April 17. We intend to pay regular cash - quarterly cash dividends in the future, as well as considering special cash and stock dividends as declared by our board of directors. At the end of the quarter, we had $36.1 million debt outstanding. Our current debt structure includes a $30 million term loan and a $90 million revolver. The term loan is fully drawn. The revolver can be drawn up again at any time for use in acquisitions, dividend or buybacks subject to pro forma covenant compliance. Cash on hand at the end of the quarter was $24.5 million.…

It just occurred to me that whenever you start this, every time you talk about our operations that involve risks and uncertainties, are you talking about me? I mean, it’s just…

Not, not…

Is there a hidden message here that I missed out all these years? Are you trying to telegraph something to…

I don’t believe so, Ed, not at all.

I just want to - I don’t know if I’m all risk or an uncertainty. Sure…

I’ll have to give it some thought. We’ll do an analysis.

Would you, please? Can we change it in the future sometime?

Yes, I understand.

Thanks. Let’s cut to the chase. Most probably nobody in the broadcast industry is happy with Q1. It would be an overstatement to call it dismal, but there is no joy and no real spend, and most importantly, there can’t be any finger pointing. We’re off if you actually kind of look at the loss of national and a few other things like this, but we were off. Our free cash was up, and candidly, as James Carville put on a whiteboard years ago, the economy is stupid. By the way, there was no, an, it’s the economy is stupid. That came in later. That’s just part of the snow cone. We in broadcasting can morph this into advertising sales stupid. Sales are there. It’s taking a lot of pulling and pushing. Our fundamentals are solid. Our procedures are solid, and operationally, there is no shakeup needed. We just need both an economic boost and a shot of consumer confidence. Now, this is going to happen. It’s just when, and if there are thoughts of broadcasting as a troubled industry, please dispel them. Our vitals are good, and there is a healthy pulse. We are relevant. We’re not aged. In short, radio and TV advertising, if done properly still works and generates results. Five AM to five PM is the most valuable time for broadcast networks. Head of BBDO just said that radio was tremendously undervalued. We know that we’re still good. Now, yes, advertising agencies are chasing the new shiny pennies that appear in the media landscape daily and temporarily appear to be more fashionable. But fashion, as we know is fickle and what is old does become new again. Let’s talk about time and Q2. We’ve talked about Q1 and it’s been hashed to death in the industry…

Lead.

Lead the markets that we’re in. Why’d I say dominate? Lead the markets we’re in or achieve a very respectable high position. We avoid industrial towns. We concentrate on four areas. We like markets that are major university towns, state capitals, brack proof large military bases or strong agriculturally-based communities. With that in mind, several weeks ago, we announced the acquisition of three FM stations, two AM stations, and an FM metro signal in Harrisonburg, Virginia, home to James Madison University with 20,000 plus students, a wide agricultural base in the Shenandoah Valley. There is a new medical center there. It’s a retail trading area and adjacent just over the mountains is our cluster in Charlottesville, Virginia. As we speak now, as of a couple of minutes ago, we announced the acquisition of two additional stations in Harrisonburg and Stanton, Virginia. However, because of FCC rules, we cannot own the Stanton station as we would be over the cap. With the closing of all these stations, we’ll own and operate the leading AM news talk station that has been there forever with 5,000 watts in 550. It has an FM metro signal. We’ll have a 50,000 watt top 40 CHR, an adult contemporary FM station, an active rock FM station, an all-sports AM station and a classic country FM station. That’s the new one that we’re announcing today. We’ll have all food groups covered and we are paying for the acquisitions with cash on hand. I mean, it’s not affecting our line or anything else, it’s internally generated cash. Additionally, we’re reviewing several other opportunities. Now, I should mention that both of the above opportunities in Harrisonburg were individual opportunities reported to Saga. No bidding wars occurred. Candidly, we are a very disciplined buyer, and sometimes it takes us a…

Most of the questions that we got we’ve already answered in the comments either between yours or mine, but we did get one interesting question that is kind of forward-looking relative to what’s going on in radio and it comes from Frank Sacks. He said, considering all the changes in radio, do you think that radio station of the future will have the same, less, more employees?

Well, first of all, I will tell you that Frank Sacks announced the other day that he is leaving inside radio, and he is probably one of the most well thought of journalists in the industry, and it’s a tremendous loss for broadcasting when you have somebody who is as insightful and dedicated to understanding and covering the radio industries, Frank. We’ll miss him tremendously and miss his writing and analysis. But that’s a good question, I guess it depends on the company. There are certain companies that are hell bent to reduce down and come perilously close to cutting into the marrow. That’s not good for the industry. There are other companies that are like us and believe that this business is built on people and our assets go home every day and if we don’t have well-trained committed people in our stations, then we lose. And I think that that’s one of the big issues that the industry faces right now is we have this race to squeeze and see how much we can rely on having empty shelves of radio stations by importing them. Again, it’s a company centric thing and it’s a philosophy on what you do. Are you trying to get it under margin or are you trying to get it under revenue? And our thinking has always been that if we get it on the revenue side, then we can afford more expenses to sustain what we have. You can’t save yourself by cutting the bottom side without injuring the top side. The idea of the audience won’t know is really a fallacy. You have to have strong mornings. You have to have strong afternoons. You have to have strong imaging. You have to have strong marketing. You have to have strong people doing it. So, the answer is a combination of both. You have several companies who do that. Will they in the long run be the leaders in the industry? They might have more stations than others, but ours is different. Look, you can go buy bulk cheese from the U.S. government or you can buy artisanal cheese, and frankly, our preference is that we don’t want to be USDA given out in 50 pound blocks to families or 10 pound blocks, that we would rather be artisanal cheese that’s well-crafted and defined. Maybe I spilled a little bit too much there, I apologize. Anything else, or was that it?

No, I think that’s it. We had questions about the Harrisonburg acquisition and you spoke to that to an extent, and with the new acquisition that we’re just announcing today, the add-on acquisition, that’ll become a lot clearer in the future as we build on that.

Yes, and before we turn it back to Lola for closing comments, both Sam and I are standing by. We’re available, 313-886-7070. There is nobody in queue right now to ask questions. So, if you act quickly and call us if you want me and we’ll also throw Sam in also, and that shipping and handling is additional. Lola, it’s back to you. We’ll talk later.

Okay. And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and using AT&T Executive Teleconference. You may now disconnect.