##### Table of Contents



UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period ended March 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-11588
 Saga Communications, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    38-3042953(I.R.S. Employer
Identification No.)73 Kercheval Avenue 
Grosse Pointe Farms, Michigan(Address of principal executive offices)
    
    48236(Zip Code)
 (313) 886-7070  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ




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##### 



INDEX
 PagePART I. FINANCIAL INFORMATION
    
    3Item 1. Financial Statements (Unaudited)
    
    3Condensed consolidated balance sheets  March 31, 2010 and December 31, 2009
    
    3Condensed consolidated statements of operations  Three months ended March 31, 2010 and 2009
    
    4Condensed consolidated statements of cash flows Three months ended March 31, 2010 and 2009
    
    5Notes to unaudited condensed consolidated financial statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    20Item 4. Controls and Procedures
    
    21PART II OTHER INFORMATION
    
    21Item 1. Legal Proceedings
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    21Item 6. Exhibits
    
    21Signatures
    
    22EX-31.1EX-31.2EX-32
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1.Financial Statements
 SAGA COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)
    
    
    (Note)(In thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    16,426
    
    
    $
    12,899Accounts receivable, net
    
    
    16,254
    
    
    
    19,096Prepaid expenses and other current assets
    
    
    1,701
    
    
    
    2,345Barter transactions
    
    
    2,025
    
    
    
    1,681Deferred income taxes
    
    
    833
    
    
    
    873Total current assets
    
    
    37,239
    
    
    
    36,894Property and equipment
    
    
    158,345
    
    
    
    158,011Less accumulated depreciation
    
    
    90,193
    
    
    
    88,795Net property and equipment
    
    
    68,152
    
    
    
    69,216Other assets:Broadcast licenses, net
    
    
    90,552
    
    
    
    90,552Other intangibles, deferred costs and investments, net
    
    
    6,880
    
    
    
    5,689Total other assets
    
    
    97,432
    
    
    
    96,241$
    202,823
    
    
    $
    202,351Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    1,081
    
    
    $
    1,345Payroll and payroll taxes
    
    
    5,496
    
    
    
    5,494Other accrued expenses
    
    
    4,095
    
    
    
    3,422Barter transactions
    
    
    2,164
    
    
    
    1,802Current portion of long-term debt
    
    
    15,200
    
    
    
    17,078Total current liabilities
    
    
    28,036
    
    
    
    29,141Deferred income taxes
    
    
    3,047
    
    
    
    1,907Long-term debt
    
    
    100,878
    
    
    
    104,000Other liabilities
    
    
    3,232
    
    
    
    3,210Stockholders equityCommon stock
    
    
    53
    
    
    
    53Additional paid-in capital
    
    
    49,669
    
    
    
    49,371Retained earnings
    
    
    46,381
    
    
    
    43,064Treasury stock
    
    
    (28,473
    )
    
    
    (28,395
    )Total stockholders equity
    
    
    67,630
    
    
    
    64,093$
    202,823
    
    
    $
    202,351
   3




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SAGA COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months EndedMarch 31,2010
    
    
    2009(Unaudited)(In thousands, except
per share data)Net operating revenue
    
    $
    27,987
    
    
    $
    26,124Station operating expenses
    
    
    22,560
    
    
    
    23,940Corporate general and administrative
    
    
    1,882
    
    
    
    2,067Operating income
    
    
    3,545
    
    
    
    117Other expenses, net:Interest expense
    
    
    1,519
    
    
    
    773Other income
    
    
    (3,596
    )
    
    
    (4
    )Income (loss) before income tax
    
    
    5,622
    
    
    
    (652
    )Income tax provision (benefit)
    
    
    2,305
    
    
    
    (290
    )Net income (loss)
    
    $
    3,317
    
    
    $
    (362
    )Earnings (loss) per shareBasic
    
    $
    0.78
    
    
    $
    (0.09
    )Diluted
    
    $
    0.78
    
    
    $
    (0.09
    )Weighted average common shares
    
    
    4,228
    
    
    
    4,161Weighted average common and common equivalent shares
    
    
    4,229
    
    
    
    4,161
  4




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SAGA COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31,2010
    
    
    2009(Unaudited)(In thousands)Cash flows from operating activities:Cash provided by operating activities
    
    $
    7,342
    
    
    $
    5,053Cash flows from investing activities:Acquisition of property and equipment
    
    
    (845
    )
    
    
    (1,065
    )Proceeds from license downgrade
    
    
    3,561
    
    
    
    Other investing activities
    
    
    50
    
    
    
    27Net cash provided by (used in) investing activities
    
    
    2,766
    
    
    
    (1,038
    )Cash flows from financing activities:Payments on long-term debt
    
    
    (5,000
    )
    
    
    (2,000
    )Payments for debt issuance costs
    
    
    (1,503
    )
    
    
    (967
    )Purchase of shares held in treasury
    
    
    (78
    )
    
    
    (20
    )Net cash used in financing activities
    
    
    (6,581
    )
    
    
    (2,987
    )Net increase in cash and cash equivalents
    
    
    3,527
    
    
    
    1,028Cash and cash equivalents, beginning of period
    
    
    12,899
    
    
    
    6,992Cash and cash equivalents, end of period
    
    $
    16,426
    
    
    $
    8,020
  5




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SAGA COMMUNICATIONS, INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Basis of Presentation
     Earnings Per Share Information
  Three Months Ended March 31,2010
    
    
    2009(In thousands, except per share data)Numerator:Net income (loss) available to common stockholders
    
    $
    3,317
    
    
    $
    (362
    )Denominator:Denominator for basic earnings per share-weighted average shares
    
    
    4,228
    
    
    
    4,161Effect of dilutive securities:Common stock equivalents
    
    
    1
    
    
    
    Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversions
    
    
    4,229
    
    
    
    4,161Basic earnings (loss) per share
    
    $
    0.78
    
    
    $
    (0.09
    )Diluted earnings (loss) per share
    
    $
    0.78
    
    
    $
    (0.09
    )
   6




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 Change in Accounting Estimate
  Revenue Recognition
 Revenue Recognition Revised and Updated Revenue Recognition
 Income Taxes
  Time Brokerage Agreements
  2. Recent Accounting Pronouncements
   7




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 3. Intangible Assets
 st
  4. Common Stock and Treasury Stock
  Common Stock IssuedClass A
    
    
    Class B(Shares in thousands)Balance, January 1, 2009
    
    
    4,770
    
    
    
    600Exercised options
    
    
    2
    
    
    
    Conversion of shares
    
    
    1
    
    
    
    (1
    )Forfeiture of restricted stock
    
    
    (2
    )
    
    
    Balance, December 31, 2009
    
    
    4,771
    
    
    
    599Conversion of shares
    
    
    1
    
    
    
    (1
    )Balance, March 31, 2010
    
    
    4,772
    
    
    
    598
  5. Stock-Based Compensation
 2005 Incentive Compensation Plan
  Stock-Based Compensation
  8




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
  Weighted AverageRemaining
    
    
    AggregateNumber of
    
    
    Weighted Average
    
    
    Contractual Term
    
    
    IntrinsicOptions
    
    
    Exercise Price
    
    
    (Years)
    
    
    ValueOutstanding at January 1, 2010
    
    
    388,469
    
    
    $
    54.56
    
    
    
    4.2
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Forfeited
    
    
    (320
    )
    
    
    37.25Outstanding at March 31, 2010
    
    
    388,149
    
    
    $
    54.58
    
    
    
    4.0
    
    
    $
    Exercisable at March 31, 2010
    
    
    349,669
    
    
    $
    56.53
    
    
    
    3.7
    
    
    $
    
  Weighted AverageNumber of
    
    
    Grant Date FairOptions
    
    
    ValueNon-vested at January 1, 2010
    
    
    80,453
    
    
    $
    19.74Granted
    
    
    
    
    
    
    Vested
    
    
    (41,653
    )
    
    
    20.88Forfeited/canceled
    
    
    (320
    )
    
    
    18.81Non-vested at March 31, 2010
    
    
    38,480
    
    
    $
    18.51
  Weighted AverageGrant Date FairShares
    
    
    ValueOutstanding at January 1, 2010
    
    
    37,368
    
    
    $
    31.45Granted
    
    
    
    
    
    
    Vested
    
    
    (14,097
    )
    
    
    35.92Forfeited
    
    
    (212
    )
    
    
    28.47Non-vested and outstanding at March 31, 2010
    
    
    23,059
    
    
    $
    28.74
  9




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 6. Long-Term Debt
  March 31,
    
    
    December 31,2010
    
    
    2009(In thousands)Credit Agreement:Reducing revolver facility
    
    $
    115,000
    
    
    $
    120,000Secured debt of affiliate
    
    
    1,078
    
    
    
    1,078116,078
    
    
    
    121,078Amounts payable within one year
    
    
    15,200
    
    
    
    17,078$
    100,878
    
    
    $
    104,000
      10




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 7. Segment Information
   CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended March 31, 2010:Net operating revenue
    
    $
    24,144
    
    
    $
    3,843
    
    
    $
    
    
    
    $
    27,987Station operating expense
    
    
    19,223
    
    
    
    3,337
    
    
    
    
    
    
    
    22,560Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    1,882
    
    
    
    1,882Operating income (loss)
    
    $
    4,921
    
    
    $
    506
    
    
    $
    (1,882
    )
    
    $
    3,545Depreciation and amortization
    
    $
    1,421
    
    
    $
    424
    
    
    $
    52
    
    
    $
    1,897Total assets
    
    $
    151,117
    
    
    $
    26,552
    
    
    $
    25,154
    
    
    $
    202,823
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended March 31, 2009:Net operating revenue
    
    $
    22,697
    
    
    $
    3,427
    
    
    $
    
    
    
    $
    26,124Station operating expense
    
    
    20,317
    
    
    
    3,623
    
    
    
    
    
    
    
    23,940Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,067
    
    
    
    2,067Operating income (loss)
    
    $
    2,380
    
    
    $
    (196
    )
    
    $
    (2,067
    )
    
    $
    117Depreciation and amortization
    
    $
    1,531
    
    
    $
    666
    
    
    $
    61
    
    
    $
    2,258Total assets
    
    $
    172,280
    
    
    $
    29,587
    
    
    $
    14,980
    
    
    $
    216,847
 11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
   General
  Radio Segment
      12




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13




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Percentage of Consolidated
    
    Percentage of ConsolidatedNet Operating Revenue for
    
    Net Operating Revenuethe Three Months Ended
    
    for the Years EndedMarch 31,
    
    December 31,2010
    
    2009
    
    2009
    
    2008Market:Bellingham, Washington
    
    
    5
    %
    
    
    6
    %
    
    
    5
    %
    
    
    5
    %Des Moines, Iowa
    
    
    6
    %
    
    
    6
    %
    
    
    7
    %
    
    
    7
    %Manchester, New Hampshire
    
    
    6
    %
    
    
    5
    %
    
    
    5
    %
    
    
    6
    %Milwaukee, Wisconsin
    
    
    13
    %
    
    
    14
    %
    
    
    13
    %
    
    
    14
    %
   Percentage of Consolidated
    
    Percentage of ConsolidatedStation Operating Income (*)
    
    Station Operating Income(*)for the Three Months Ended
    
    for the Years EndedMarch 31,
    
    December 31,2010
    
    2009
    
    2009
    
    2008Market:Bellingham, Washington
    
    
    7
    %
    
    
    10
    %
    
    
    7
    %
    
    
    7
    %Des Moines, Iowa
    
    
    3
    %
    
    
    5
    %
    
    
    7
    %
    
    
    4
    %Manchester, New Hampshire
    
    
    8
    %
    
    
    10
    %
    
    
    7
    %
    
    
    11
    %Milwaukee, Wisconsin
    
    
    20
    %
    
    
    25
    %
    
    
    20
    %
    
    
    20
    %
 
 *
    
    Operating income (excluding non-cash impairment charge) plus corporate general and
administrative expenses, depreciation and amortization, impairment of intangible assets, less
gain on asset exchange. 14




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Television Segment
          15




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Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 Results of Operations
  Consolidated Results of Operations
 Three Months EndedMarch 31,
    
    
    $ Increase
    
    
    % Increase2010
    
    
    2009
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages and per share information)Net operating revenue
    
    $
    27,987
    
    
    $
    26,124
    
    
    $
    1,863
    
    
    
    7.1
    %Station operating expense
    
    
    22,560
    
    
    
    23,940
    
    
    
    (1,380
    )
    
    
    (5.8
    )%Corporate G&A
    
    
    1,882
    
    
    
    2,067
    
    
    
    (185
    )
    
    
    (9.0
    )%Operating income
    
    
    3,545
    
    
    
    117
    
    
    
    3,428
    
    
    
    N/MInterest expense
    
    
    1,519
    
    
    
    773
    
    
    
    746
    
    
    
    96.5
    %Other income, net
    
    
    (3,596
    )
    
    
    (4
    )
    
    
    (3,592
    )
    
    
    N/MIncome tax expense (benefit)
    
    
    2,305
    
    
    
    (290
    )
    
    
    2,595
    
    
    
    N/MNet income (loss)
    
    $
    3,317
    
    
    $
    (362
    )
    
    $
    3,679
    
    
    
    N/MEarnings (loss) per share (basic and diluted)
    
    $
    .78
    
    
    $
    (.09
    )
    
    $
    .87
    
    
    
    N/M
 Radio Broadcasting Segment
 Three Months EndedMarch 31,
    
    
    $ Increase
    
    
    % Increase2010
    
    
    2009
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    24,144
    
    
    $
    22,697
    
    
    $
    1,447
    
    
    
    6.4
    %Station operating expense
    
    
    19,223
    
    
    
    20,317
    
    
    
    (1,094
    )
    
    
    (5.4
    )%Operating income
    
    $
    4,921
    
    
    $
    2,380
    
    
    $
    2,541
    
    
    
    106.8
    %
 Television Broadcasting Segment
 Three Months EndedMarch 31,
    
    
    $ Increase
    
    
    % Increase2010
    
    
    2009
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    3,843
    
    
    $
    3,427
    
    
    $
    416
    
    
    
    12.1
    %Station operating expense
    
    
    3,337
    
    
    
    3,623
    
    
    
    (286
    )
    
    
    (7.9
    )%Operating income (loss)
    
    $
    506
    
    
    $
    (196
    )
    
    $
    702
    
    
    
    N/M
 
 N/M =
    
    Not Meaningful 16




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Reconciliation of segment operating income (loss) to consolidated operating income:
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended March 31, 2010:Net operating revenue
    
    $
    24,144
    
    
    $
    3,843
    
    
    $
    
    
    
    $
    27,987Station operating expense
    
    
    19,223
    
    
    
    3,337
    
    
    
    
    
    
    
    22,560Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    1,882
    
    
    
    1,882Operating income (loss)
    
    $
    4,921
    
    
    $
    506
    
    
    $
    (1,882
    )
    
    $
    3,545
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended March 31, 2009:Net operating revenue
    
    $
    22,697
    
    
    $
    3,427
    
    
    $
    
    
    
    $
    26,124Station operating expense
    
    
    20,317
    
    
    
    3,623
    
    
    
    
    
    
    
    23,940Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,067
    
    
    
    2,067Operating income (loss)
    
    $
    2,380
    
    
    $
    (196
    )
    
    $
    (2,067
    )
    
    $
    117
 Consolidated
     17




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Radio Segment
    Television Segment
    18




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Forward-Looking Statements
   Liquidity and Capital Resources
 Debt Arrangements and Debt Service Requirements
       19




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Sources and Uses of Cash
   Summary Disclosures About Contractual Obligations and Commercial Commitments
   Critical Accounting Policies and Estimates
  Inflation
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  20




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Item 4. Controls and Procedures
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    
    Approximate DollarShares Purchased
    
    
    Value of SharesTotal Number
    
    
    
    
    
    
    as Part of Publicly
    
    
    that May Yet beof Shares
    
    
    Average Price
    
    
    Announced
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Program
    
    
    Program(a)January 1  January 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    14,518,317February 1  February 28, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    14,518,317March 1  March 31, 2010
    
    
    5,466
    
    
    $
    14.25
    
    
    
    5,466
    
    
    $
    14,440,427Total
    
    
    5,466
    
    
    $
    14.25
    
    
    
    5,466
    
    
    $
    14,440,427
 
 (a)
    
    On August 7, 1998 our Board of Directors approved a Stock Buy-Back Program of up to
$2,000,000 of our Class A Common Stock. Since August 1998, the Board of Directors has
authorized several increases to the Stock Buy-Back Program, the most recent occurring in
January 2008, which increased the total amount authorized for repurchase of our Class A Common
Stock to $60,000,000. The terms of the Credit Agreement, as amended, limit our ability to
repurchase our Class A Common Stock. 
 Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
 31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
 32
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 and Rule 13-14(b) of the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 21




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SIGNATURES
  SAGA COMMUNICATIONS, INCDate: May 14, 2010
    /s/ SAMUEL D. BUSHSamuel D. BushSenior Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer)Date: May 14, 2010
    /s/ CATHERINE A. BOBINSKICatherine A. BobinskiVice President, Corporate Controller and Chief
Accounting Officer (Principal Accounting Officer) 22