Saga Communications, Inc. (SGA)

SGA 
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Saga Communications, Inc. (SGA)

Q4 2013 Earnings Conference Call

March 11, 2014 2:00 PM ET

Executives

Ed Christian - Chairman, CEO and President

Sam Bush - CFO, SVP and Treasurer

Analysts

Presentation

Operator

Ladies and gentlemen, thank you for standing-by. Welcome to the Fourth Quarter 2013 and Year End Results for Saga Communications. At this time, all participants are in a listen-only mode. (Operator Instructions) I would now like to turn the conference over to our host, Mr. Ed Christian, President and CEO. Please go ahead.

Ed Christian

Thank you, Anna and good afternoon everybody and as usual we will kick things off with Sam Bush with the disclaimer and results.

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. 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, are attached in the selected financial data table.

During the quarter, we had $345,000 in gross political revenue compared to $4 million during the fourth quarter of 2012. Excluding political revenue, our gross revenues increased 3.8% for the fourth quarter. Net revenues decreased 5% this quarter. We experienced nice growth in both national and local again this quarter as gross national was up 9.1% and gross local revenue was up 3.5%. Station operating expenses were only up 1% for the quarter as we continue to watch what we spend, while also continuing to invest for the future.

National accounted for approximately 14.5% of gross revenue for the quarter compared to 12.5% for the same period last year. For the year we had 785,000 in gross political revenue compared to 6.7 million in 2012. Excluding political revenue, our gross revenues increased 3.3%. Our stations did a great job of making up most of the decline in political revenue, as for the year net revenues only declined 0.006. This was a decline of only 781,000 pretty good given the 6.7 million of political we had to make up.

Station operating expense increased 2.8 million for the year with almost half of this increase being due to an 800,000 in increase music licensing fees and a 500,000 increase in healthcare cost. Free cash flow for the year was 21.6 million. Saga continues to maintain a very solid balance sheet. Our total outstanding debt is 46.1 million after a $5 million pay down in November. On December 12, 2013, we paid our second special dividend in the amount of 10.3 million. This follows the special dividend that we paid on December 3, 2012 in the amount of 7 million. It’s a real pleasure to be able to reward our shareholders with theses dividends for their confidence in Saga. We will continue to be looking at uses for our free cash flow including acquisitions, dividends, stock buybacks and continuing investment in the Company.

On the TV stations retransmission revenue was 574,000 in the fourth quarter, up from 467,000 last year. Retrans payments to the networks were 153,000 in the quarter compared to 99,000 last year. For the year, our retrans revenue was 2.3 million and retrans payments to the networks were 590,000.

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 282,000 compared to 366,000 for the fourth quarter of 2012. For the year, interest expense was 1.3 million compared to 1.7 million last year. For the year, half of this decrease is due a reduction in interest rates while the other half is due to the amount of debt we had outstanding. As of today, we have approximately 22 million in cash on-hand and at yet year-end the cash balance was 17.6 million.

As reported in the press release, capital expenditures were 1.7 million for the quarter compared to 1 million for the quarter last year. For the year, they were 5.1 million compared to 4.9 million last year. We currently expect our CapEx for 2014 to be around 5.5 million. We are also in the process of buying or building out a number of new metro stations. This is what we call the translators we own and operate in conjunction with our other station operations. A number of these new metro stations will bring new programming into the markets they serve. I expect the cost to build out these stations to add between 500,000 and 1 million to our capital expenditures in 2014. This estimate is not included in the 5.5 million indicated as our capital expenditures for 2014.

As far as our 2014 is starting out, we ended January and February with net revenue being up between 1% and 2%. March and April are both pacing up around 1%, so I think we can expect to see us in the first quarter up 1% to 2%.

Two other quick items for 2013, we expect interest expense for the year to be between 1.1 million and 1.4 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 2.7 million and 3 million. As usual, we asked for your questions to be submitted via email prior to the call. Ed and I will respond to those questions that we feel we can appropriately respond to later in the call, Ed, back to you.

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