Saga Communications, Inc. (SGA)

SGA 
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Industry: Consumer Services
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Saga Communications (SGA)

Q2 2013 Earnings Call

August 06, 2013 2:00 pm ET

Executives

Edward K. Christian - Chairman, Chief Executive Officer and President

Samuel D. Bush - Chief Financial Officer, Senior Vice President and Treasurer

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Ed Christian. Please go ahead.

Edward K. Christian

Thank you very much. Welcome to Q2. And with that, with some short verbiage and analysis, here is Sam Bush.

Samuel D. 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 Factor section of our most recent Form 10-K. Actual results may differ materially from those expressed in this conference call. This call will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of Reg S-K. Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure is attached in the selected financial data table.

Net revenues increased 2.6% this quarter. During the quarter, we had $172,000 in gross political revenue, compared to $717,000 last year. Netting up the political revenue, our gross revenues increased 4.1% for the second quarter.

We experienced nice growth in both national and local this quarter. Our gross local revenue increased 4.4% or almost $1.2 million over second quarter last year. National increased 7.6%, or $342,000 over the same period last year. And national accounted for approximately 13.1% of gross revenue for the quarter, compared to 12.5% for the same period last year.

We are anticipating a bit of a revenue challenge in the third quarter, as last year, we had almost $1.5 million in political for the quarter. That said, July started the quarter off nicely, being up low-single digits. August and September are both pacing down low-single digits, but in reality, it's too early to tell how they will finish.

As stated in the press release, station operating expense increased $1.5 million for the quarter. Over half of this increase was due to the expense in the second quarter of last year being reduced by the $851,000 credit we received from music licensing fees. Normalizing for comparison, our expenses were up 3% for the quarter.

Retrans revenue was $588,000 in the second quarter, up from $466,000 last year. Retrans expenses, payments to the networks, were $153,000 in the second quarter, compared to $106,000 last year. You'll see similar results in the third and fourth quarter for this year.

In the other income or expense area, we continue to see a nice reduction in our interest expense for the quarter. Interest expense for the quarter was $357,000 compared to $458,000 for the second quarter of 2012. This is primarily due to the reduction in the level of our interest rate, as well as in the amount of debt we had outstanding. As of today, we have approximately $23 million in cash on hand.

On May 31, we amended our credit facility to extend the maturity 2 years to May 31, 2018. The facility is for $120 million and consists of a $30 million term loan, which is fully drawn, and a $90 million revolver, which has a $20 million outstanding balance. Our current rate, based on our leverage, is 1.25% over LIBOR, and we do not have any floor on LIBOR.

As long as our leverage stays below 2x EBITDA, we have no required debt repayments. Our current leverage is 1.35x. We paid the outstanding principal balance down $7,750,000 during the quarter.

As reported in the press release, capital expenditures in the quarter were $1.3 million, which is approximately the same as last year. We currently expect our CapEx for the year to be between $5 million and $5.5 million.

Two other quick items for 2013. We expect interest expense for the year to be between $1.4 million and $1.6 million. Given the existing interest rate environment, our anticipated total tax rate going forward will be between 40% and 41%, with deferred taxes for 2013 to be between $3.5 million and $4 million.

As usual, we asked for your questions to be submitted via email prior to the call. Ed and I will respond to those that we haven't already responded to at the end of Ed's comments. Ed, back to you.

Edward K. Christian

Thank you, Sam. Also in the room with us today is Warren Lada. So in the background, if you hear somebody going, "Go boy" or "You rock", that's Warren kind of urging us on to -- as we continue on with our comments.

I'm the going to give you my monic right now or another way to remember something. And it's monosodium glutamate, MSG, and I did this with Warren and Sam before the call, so they would know. And Warren said, "Oh yes, that's associated with Chinese restaurants." And actually, it's called the Chinese restaurant syndrome because, one, MSG was very big at that time. It had caused or it was portended to cause headaches when they go into Chinese restaurants. And we're not saying anything about that, except that MSG will help you remember moderate sluggish growth, which is what I feel that we're in right now. Moderate sluggish growth. It's a wonderful way of explaining exactly what's going on, moderate, sluggish, and we're still growing. That's what we're in right now. And I think I'm afraid that we're going to be in it for some time. And not only as an industry, but also as a country. Bad news, the economy could be near [indiscernible] speed, I don't think so. I don't see a recession. GDP was up 1.7% for Q2.

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