Saga Communications, Inc. (SGA)

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Saga Communications, Inc (SGA)

Q2 2014 Earnings Conference Call

August 11, 2014 02:00 PM ET

Executives

Ed Christian - Chief Executive Officer

Sam Bush - Chief Financial Officer

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the second quarter 2014 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 would now like to turn the conference over to your host, President and CEO, Mr. Ed Christian. Please go ahead.

Ed Christian

Hello, I'm your host. Does that always sound pretty good, doesn't it Samuel?

Sam Bush

You are the host.

Ed Christian

Am I the host? Well, see you about there after we do our results. Anyway, thank you all for joining us. And as usual with the intro and the information, here is Sam Bush.

Sam Bush

Good afternoon. 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 quarter, net revenues were flat remaining at 33.8 million. Station operating expenses were also flat remaining at 23.5 million. Free cash flow for the quarter was 5.9 million, compared to 6.2 million for the same period last year. The biggest part of the difference is that we spent a 167,000 more on CapEx during the second quarter this year.

We still anticipate free cash flow for the year to be between 20 million and 22 million. National accounted for approximately 11.8% of gross revenue for the quarter, compared to 13.1% for the same period last year.

Gross political revenue for the quarter was 257,000 compared to a 172,000 for the same period last year. Of that, radio was 227,000 this quarter versus 88,000 last year, television was 30,000 compared to 84,000. Currently, we expect our station operating expenses to increase 2% to 3% over the remainder of the year. Keep in mind this could fluctuate a bit as you’ve seen so far this year. Healthcare costs primarily caused the 3.9% increase in station operating expenses in the first quarter as well as the small increase in healthcare costs allowed the second quarter expenses to be flat.

Subsequent to the end of the quarter, we paid our first quarterly cash dividend of $0.20 per share. The dividend was paid on July 25th and was in the amount of 1.1 million. We have now returned over 18 million in cash to our shareholders in the past one-and-a-half-years. We intend to pay regular quarterly cash dividends in the future as are declared by our Board of Directors. Additionally, in July, we paid down debt by another 5 million, leaving our total outstanding debt at 41.1 million. At the end of the quarter, we had 46.1 million debt outstanding.

Keep in mind that 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 an acquisition, dividend, or buyback, subject to pro forma covenant compliance, which with our leverage is not an issue.

Cash on hand at the end of the quarter was 25.9 million. As of today, we had 23.9 million. We continue to look at uses for our free cash flow including acquisitions, dividends, stock buybacks, and continuing investment in the company. Retrans revenue was 636,000 in the quarter, up from 589,000 last year. Retrans payments to the networks were 165,000 in the quarter compared to 153,000 last year. We will be entering into retrans negotiations in both our TV markets later this year, there will be no significant impact from these negotiations for the remainder of 2014.

Interest expense for the quarter declined to 272,000 from 357,000 last year, primarily due to a reduction in the debt outstanding. Capital expenditures were 1.5 million for the quarter compared to 1.3 million last year. We currently expect our CapEx for 2014 to be around 5.5 million.

We expect interest expense for 2014 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 2014 to be between 2.9 million and 3.2 million. Third quarter is currently pacing up between 2% and 3%, without political we'd be pacing up around 1%.

As usual, we ask 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.

Ed Christian

For thousands of years, the word flat was just fine, okay, because the world was flat.

Sam Bush

It was flat.

Ed Christian

That all changed. So we announced that we are flat. That's not really acceptable, but understandable. And I noticed on listening to a lot of your calls and reading all of the write-ups and reviews of the other calls in our sector that a lot of words came out. We've heard some new ones. Sam just told me about one the other day, lumpy, that we learned, which is a good word to describe what's going on. Choppy is another one. Uneven is another one. Soft or easy word, erratic. And I decided we had to come up with something different, because we can't be like the

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