Ed Christian - President and CEO Samuel Bush - Chief Financial Officer

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter Results Conference 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 our host, Mr. Ed Christian, President and CEO. Please go ahead, sir.

Thank you, Cathy. I appreciate it and welcome to Q2 conference call. Sam, I have a question for you as well before I start off?

Okay.

Have you ever wondered who the composer is that writes the music on hold?

On hold? I actually can’t say that I have. But I will now.

Do you think it’s copy written?

Probably so.

Write protected that they have to pay royalties for it.

Probably so.

All right. Sam, if you wouldn’t mind to begin.

I’ll be glad to. 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 tables. During the quarter, net revenue increased 1.6% over the same period last year. Station operating expenses increased $812,000. A little over $750,000 of this increase was due to increases in our healthcare cost and in sales surveys, licensing fees. Free cash flow decreased $281,000 to $5.7 million. National accounted for $4.5 million, 12.1% of gross revenue for the quarter, compared to $4.4 million, which was 11.8% for the same quarter last year. Gross political revenue for the quarter was $158,000 compared to $257,000 for the same period last year. Radio was $148,000 in this quarter versus $227,000 last year. Television had $10,000 this quarter compared to $30,000 last year. During the quarter, we declared a quarterly cash dividend of $0.20 per share that was paid on July 10th. We intend to continue to pay regular 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. Cash on hand at the end of the quarter was $27.4 million. Currently, we have cash on hand of a little over $19 million as we closed on the first part of our Harrisonburg, Virginia acquisitions last Friday using cash to fund the balance of the $9.64 million purchase price. Capital expenditures were $1.3 million for the quarter, compared to…

Thanks, Sam. Let me just start with the headline of an article in the Wall Street Journal the other day. I think it says it all. Economy picks up but stays in a rut. I couldn’t have said it any better and if I’ve said it once, I’ve said it 100 of times, 100s of times actually. Broadcasting mirrors the economy. Saga was up thankfully, but we are in a rut. It is not and I really underscore the word not, because we are an endangered industry. Just today in Inside Radio, there was the lead article that radio’s audience hit an all time high in Q2, some 245 million people use radio in a given week, according to Nielsen. That’s pretty impressive. Now, if we do our craft properly, these people -- these 245 million people respond to our advertising messages and businesses continue to respect the power and reach of broadcast advertising. Please, do me a favor and disregard what the tin-foil-hat people say about radio and TV. We are not going to be replaced by targeted display. There is room for targeted display, but not entirely on our expense. There is always a rush for new things. The new, hip restaurants, new clubs. However, successful and established clubs or restaurants don’t close down because of it. If these places are smart, they adapt, remodel, concentrate on their core competency and super serve their clientele. And we do the same in broadcasting. Saga is not a flashy company. We increase business by hard work and determination that what we do works well for our customers. We don’t use hip terms, we don’t have silos, but I told Sam earlier, I think if there is one across the road from our agri business station, WNAX.

And probably one or two across the road from Spencer, Iowa and Mitchell too.

Well, no that’s a farm supply.

That could be.

We do have a silo I guess, it’s not ours, but it’s silo that we could talk about. Okay. Sam mentioned Harrisonburg. Let me tell you just a little bit about. We’re very happy with that because it fits our criteria of dominance and having dominant, well respected stations. For instance, WSVA AM, a heritage radio station, it’s been the market leader for 80 years with adults in the market and Harrisonburg again fits what we look for, it’s a retail trading center, a great regional medical center, diverse economy, in the town, agriculture in the Shenandoah Valley and a major university with James Madison University with 22000 students. And as Sam mentioned, we finished the acquisition with -- when we closed at the end of this month with WSIG and so we are also having four FMS, two AM stations, WSIG being a classic country station with great ratings from. This will be a nice contributor, it’s already very cash flow positive and will increase with the synergies and really having new market dominance. We are also actively reviewing other potential growth opportunities, but I think I’ve said this before. We have a well defined criteria and we just don’t acquire for the sake of announce value. We never have and that isn’t about the change. I’ve long said that any person or company can buy a radio or TV station. Operating them, paying for it is an entirely different matter, so we are very cautious with your money and our commitment to the acquisition. We are not oblivious to market conditions and market trends, let me just make that right there. It’s not like we are saying the only thing is radio and we don’t look at anything else. We certainly believe in radio, we certainly try in…

We did have a couple of questions come in today, Ed, but for the most part we covered them in your comments and/or comments, so I think we are good to go at this point.

Cathy, then if you would be so kind as to give the wrap up and we will let people get back to business.

That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.