Ed Christian - Chairman, CEO and President Sam Bush - CFO, SVP and Treasurer

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.

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

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.

Julian thank you, that’s too formal. I was just thinking while we’re doing this, we’ve done this for so long, but I always say and we’ll have the summary and then the results. And I just thought for a second while you were doing that, I am sure glad that I won’t have to -- have you do the, well I’ll say I am going to say -- we’re going to have the results then the disclaimer then we would be starting to sound like a couple other broadest companies, so we don’t want to go there. I was hoping for a little better in quarter four, we can always do a little more, we can always do a little better but with that I think that I’m not disappointed, we’re just pleased with the results. But we as I said we always look for just a little bit more. One thing that I can say that we learned from the quarter is in set of sequential orders which is polar vortex. Saga operates in a lot of Mid America markets and a lot in New England and I really don’t have to tell you what the last four months have been like or so in those markets it’s just outright miserable. For those of you who live in that area know exactly what I’m talking about. I was talking with one of our managers the other day and he said people were irritable and it’s glooming and people were lethargic. You can almost hear the outcry, I mean enough of this, I’m just tired of this, this has got to stop and because of this mindset when people I don’t want to go out, I just want to stay in my house I want to keep warm. If somebody says to you hey, what’s coming for dinner tonight, let’s go to a restaurant, first thing is no, I don’t want to go out I don’t want to do anything and you can’t imagine in this environment somebody say, hey gee honey let’s go on out and go car shopping, this has been a real impediment to us. A friend of mine in Main was talking to me other day that she only goes out to the grocery store and back and to get groceries it’s just a beeline out, beeline back and this is what is part of the thing that’s inhibited us in the latter part of Q4 and certainly in the first part of Q1. Where right now I think I saw we’re pacing probably about 2% in that area there but again it should be more but that’s what we’re facing with right now. I really don’t need to explain to you what this does to retail sales, retail sales I have said it time-and-time again there are stimulus and a catalyst for our business. Now weather is still continuing Detroit is expected to get six to eight inches tonight through tomorrow I mean this is March, people are going come on we’re in March can we get out of this. So with that said I think that you understand why Q4 was tough and Q1 is -- we’re moving on a day-to-day basis. Now, I’m not going to blame the weather, you can’t really blame weather, it just happens, essentially to be candid with you we didn’t have a lot of categories that were up, but I do believe that our stations did a yeoman’s job of massaging and expanding the revenue dollars that they did capture. Couple of other things touching on Sam’s remarks, a lot is said about and I read this all the time about the streaming of radio stations and how it is somewhat the future of our business. Well I agree with the actual point that it is additive and it’s nice to have radio available to computers and business environments. Now sort of we don’t embrace stream as a solid revenue model, we do it, we stream a lot of our stations, we’ve spoken about this many times and it’s nice to see that research is beginning to bear us out, it is not a revenue model. And I want to share in paraphrase from a report from Generator Research from RAIN News this is rebuttals publication and if you don’t subscribe to it, it’s really very insightful one on both radio and the Internet and where we see, if I can see it right here. By the way, it is rainnews, one word 2 ns .com and the home music subscription sector is intrinsically unprofitable, that is a stark conclusion of 150 page financial research report released by a British company Generator Research. Unsustainably high cost of operation will prevent possibility according to the report which examined Pandora, iTunes, Deezer, Spotify and other services in five music markets. The report makes the profitability problem, plainly and cost of content, newsflash, where all repayments to music rights holders, I know they get between 60% and 70% of revenues are paid to labels and publishers. The study predicts that usage growth can never catch up to expenses, and the key metric in this study is profit, pessimism is operating cash flow on a percentage of incoming cash that survives the cost of operation, now there’s probably another 149.5 pages to the report but for those of you who are interested, take a look at it. And with this in mind, this Pandora is trying to sell radio ads and there is all of this question of, who, and what and how? We actually came across Pandora so we are sitting in a car store in King, New Hampshire, so it’s not limited to just the major markets, wherever they can find somebody to go and pitch somebody you run into them, but again once again radio is free and portable and we do have our music streaming rights, but we’re not in these horrendous condition because it’s an ancillary product to us and not mainstream. It is an enhancement for us no question about it, it’s enhancement to what we do already with our over the air products. Now for the remainder of 2014 I envisioned better times than we’re currently experiencing. I mean it can’t snow in June, well with that said who knows, I don’t want to be -- you have to remember there’s a difference between weather and climate and that’s an entirely different story but national retail federation forecasts are predicted, they predicted in the couple of weeks, retail sales will rise 4.1% in 2014. Report says though consumers continue to pinch pennies analysts remain optimistic the choppers will remain confident, and there’s another report let me see if I see can just find that right here. As is always I don’t have my pages in major. The other report is from BDO which is looking at a 5.1 increase in sales which is pretty good so we’re pretty happy about both reports on that. We’ve always had a strong consumer confidence reinforcing strong radio and TV advertising revenues and with that said I kind of breathe a sigh of relief and it reduces all the anxiety for 2014. We have a number of initiatives that are coming up that are on the drawing boards right now that we’re working on to enhance our revenue for the year and that’s pretty important to us. We’ll share those as the year comes on it is a little premature and a couple of them we might even be able to talk about in a few weeks. Revenue growth is job one, make no doubt about that, that’s our whole thing here, is to continue to serve our markets, there are 244.4 million Americans that listen to radio in a given week we have a healthy audience out there and we can do our job in both radio and TV. It is job one, revenue growth and we are mindful of expenses and not cutting to the point of injuring a product and I continue to see a cutting, pruning, trimming of expenses in the radio industry and the damnation of CapEx, and by the way Sam I think we’re high on our translator build up estimate.

I think so too, I was being conservative by all counts.

Okay but that’s more than I’m planning on spending so…

You’re going to know more than I do on that.

Anyway cutting and pruning and squeezing, it always reminds me of the consumer products inventory but they take the same package, but they shrink the size of it, or they make the products larger and less content in it whatever it might be. And it seems to work for them where to get increases and profitability, as less products in a bigger box or the same sized box with less product in it. You can’t do that in broadcasting because shrinkage shows your quality let it hang out every day what you hear on the air is our product and after a while you might start saying well does it sound good or does it sound the same and that’s something that we as an industry have to be very, very watchful on. Is to keep the quality there because it’s only the quality that we have that encourages the listeners and it’s only the localness that we have that encourages the listeners. And without that we’re no better than a streaming signal on radio and that’s something we really have to look at. So I think that’s about it. We do some questions I think don’t we Sam?

Yes, we have a number of questions from John and Marcie at Wells Fargo, only one of which I think we really did not address already and it really was, I did talk about our free cash flow and that we’ve done the two special dividends one in 2012 and one in 2013. But the question is it seems like M&A was your biggest free cash flow priority from the last call, do you have anything in the pipeline?

Sure, we always do, the question is whether it’s the signs of what we have in the pipeline, there’s no questions that we’re seeing some more acquisition opportunities come in the marketplace we’re really very disciplined when it comes to that and it has to make a lot of strategic sense. I think everybody saw in the last downturn those companies that went out and assembled for the sake of being a broadcast company and bought anything that literally moved or though they could radio. Are no longer part of the industry and that’s a problem is that you have to assemble them easily and quickly. I mean if some of the great mistakes in corporations in America happened, made by too much planned extension and too far flung enterprises or factories, so we’re very cautious of that and it has to fit a certain criteria before we do it. With that said we do have a couple of things that we’re looking at now that do fit the criteria and they’re really not at this point on the market there is standard allocations and we can do something but it takes a while to do it.

Very good, I think that’s it with the questions because as I said I think we’ve addressed most of the rest in either your or my comments already.

As usual Sam and I are ready for any questions that you want to have offline and we will be glad to talk to you about anything that you will as you know we love to chat and we’re available. And with that operator we’ll turn it back to you for a closure on this.

Well ladies and gentlemen. We thank you for your participation and for using the AT&T Executive Teleconference Services. You may now all disconnect.

Thank you very much for your help.

You’re welcome.

Alright. Bye, bye.

Bye, bye.