Saga Communications, Inc. (SGA)

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Saga Communications (SGA)

Q3 2013 Earnings Call

November 05, 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

Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Ed Christian. Mr. Christian, you may begin.

Edward K. Christian

Thank you very much, and thanks to all of you joining us on our third quarter conference call. As is historic with us, here is Sam with the obligatory announcement and some commentary.

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 Factors 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.

During the quarter, we had $206,000 in gross political revenue compared to $1.5 million last year. Excluding political revenue, our gross revenues increased 5.2% for the third quarter. Net revenues increased 1.6% this quarter.

We experienced nice growth in both national and local this quarter. We increased our gross local revenue 4.6% or almost $1.2 million over third quarter last year. National increased 11.9% or $539,000 over the same period last year. National accounted for approximately 14% of gross revenue for the quarter compared to 12.8% for the same period last year.

We will have a challenge with revenue in the fourth quarter as will every other broadcaster. Fourth quarter of 2012 was a great revenue quarter for Saga, with net revenue increasing 10.3% over 2011, principally due to the $4 million in political revenue we received.

Without the political revenue this year, we are expecting to be down mid- to high-single digits. We are working on a number of initiatives to stimulate revenue in the quarter, but even with these efforts, we don't expect to be able to make up the $4 million in political.

In the fourth quarter of 2012, political revenue accounted for over 10% of our gross revenue. Our current expectations are for us to receive between $4 million to $6 million of political revenue in 2014, as the tide turns back through more elections.

As stated in this press release, station operating expense increased $1.2 million for the quarter. Approximately 1/3 of the increase was due to an increase in health care cost as we had several large claims hit our stop-loss limit, thus increasing our health care cost significantly in the quarter. We don't expect future quarters to repeat this increase, but since we are self-insured, we are subject to variations sometimes bad, sometimes good, quarter-to-quarter.

A number of other areas showed increases as well, including sales compensation expense going up $170,000 and programming salaries going up $196,000.

The sales compensation expense increase was due to our improved sales performance, while the programming salaries increase is a matter of reinvesting in our people supporting our future performance.

We continually monitor our expenses to make sure that each and every expense is justified and will benefit our ongoing performance. Currently, we expect fourth quarter station operating expenses to be up 1% to 3%.

Retrans revenue in our TV division was $582,000 in the third quarter, up from $480,000 last year. Retrans payments to the networks were $133,000 in the third quarter compared to $104,000 last year. We expect Retrans revenue of $2.2 million for all of 2013, with a corresponding expense of $600,000 for a net of $1.6 million to Saga. The net should increase somewhere between $200,000 and $300,000 for 2014.

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 $308,000 compared to $381,000 for the third quarter of 2012. This is primarily due to the reduction in the amount of debt we had outstanding. As of today, we have approximately $29 million in cash on hand.

As reported in the press release, capital expenditures in the quarter were $1 million compared to $1.4 million 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 $1.3 million and $1.5 million given the existing interest rate environment.

Our anticipated total tax rate going forward will be between 40% and 41%. We anticipate deferred taxes for 2013 to be between $3.3 million and $3.6 million.

As usual, we asked for your questions to be submitted via e-mail prior to the call. We had 6 questions, all of which we have responded to or will respond to in Ed's and my comments. Now, Ed, back to you.

Edward K. Christian

Thank you. Sam and I have talked about what Q4 is going to be like, and I think it is a safe assumption that he said, obviously, we're going to try and do a little bit better in that. But it's a tough path with political as much as it was last year.

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