##### 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 September 30, 2008
 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
    
    38-3042953(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)73 Kercheval Avenue 
Grosse Pointe Farms, Michigan
    
    48236(Address of principal executive offices)
    
    (Zip Code)
 (313) 886-7070  (Registrants telephone number, including area code)
 þ o
  Large
accelerated
filer oAccelerated
filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



INDEX
 PagePART I.
    
    FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Financial Statements (Unaudited)
    
    
    3Condensed consolidated balance sheets  September 30, 2008 and December 31, 2007
    
    
    3Condensed consolidated statements of income  Three and nine months ended September 30, 2008 and 2007
    
    
    4Condensed consolidated statements of cash flows Nine months ended September 30, 2008 and 2007
    
    
    5Notes to unaudited condensed consolidated financial statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29PART II
    
    OTHER INFORMATION
    
    
    30Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 6.
    
    Exhibits
    
    
    30Signatures
    
    
    
    
    31EX-4(f) Assignment and Acceptance dated as of September 29, 2008EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32 Section 906 Certification of CEO and CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.Financial Statements
 
 SAGA COMMUNICATIONS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Note)(In thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    7,997
    
    
    $
    13,343Accounts receivable, net
    
    
    22,269
    
    
    
    23,449Prepaid expenses and other current assets
    
    
    5,176
    
    
    
    4,590Total current assets
    
    
    35,442
    
    
    
    41,382Property and equipment
    
    
    156,680
    
    
    
    153,504Less accumulated depreciation
    
    
    82,791
    
    
    
    77,287Net property and equipment
    
    
    73,889
    
    
    
    76,217Other assets:Broadcast licenses, net
    
    
    169,001
    
    
    
    163,102Goodwill, net
    
    
    54,976
    
    
    
    49,661Other intangibles, deferred costs and investments, net
    
    
    6,507
    
    
    
    7,282Total other assets
    
    
    230,484
    
    
    
    220,045$
    339,815
    
    
    $
    337,644Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    1,486
    
    
    $
    3,017Payroll and payroll taxes
    
    
    6,562
    
    
    
    7,722Other accrued expenses
    
    
    4,708
    
    
    
    4,848Barter transactions
    
    
    2,314
    
    
    
    1,720Current portion of long-term debt
    
    
    1,061
    
    
    
    Total current liabilities
    
    
    16,131
    
    
    
    17,307Deferred income taxes
    
    
    40,395
    
    
    
    36,829Long-term debt
    
    
    133,350
    
    
    
    129,911Other liabilities
    
    
    3,873
    
    
    
    4,521Stockholders equityCommon stock
    
    
    215
    
    
    
    213Additional paid-in capital
    
    
    51,681
    
    
    
    50,600Retained earnings
    
    
    119,508
    
    
    
    112,137Treasury stock
    
    
    (25,338
    )
    
    
    (13,874
    )Total stockholders equity
    
    
    146,066
    
    
    
    149,076$
    339,815
    
    
    $
    337,644
   3




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)(In thousands, except per share data)Net operating revenue
    
    $
    36,192
    
    
    $
    36,218
    
    
    $
    105,066
    
    
    $
    106,522Station operating expenses
    
    
    26,588
    
    
    
    25,975
    
    
    
    79,255
    
    
    
    78,986Corporate general and administrative
    
    
    2,485
    
    
    
    2,272
    
    
    
    7,611
    
    
    
    7,194Gain on asset exchange
    
    
    (282
    )
    
    
    
    
    
    
    (506
    )
    
    
    Operating income
    
    
    7,401
    
    
    
    7,971
    
    
    
    18,706
    
    
    
    20,342Other expenses, net:Interest expense
    
    
    1,889
    
    
    
    2,283
    
    
    
    5,760
    
    
    
    6,861Other expense, net
    
    
    
    
    
    
    60
    
    
    
    27
    
    
    
    142Income before income tax
    
    
    5,512
    
    
    
    5,628
    
    
    
    12,919
    
    
    
    13,339Income tax provision
    
    
    2,415
    
    
    
    2,307
    
    
    
    5,452
    
    
    
    5,468Net income
    
    $
    3,097
    
    
    $
    3,321
    
    
    $
    7,467
    
    
    $
    7,871Earnings per shareBasic
    
    $
    .16
    
    
    $
    .17
    
    
    $
    .38
    
    
    $
    .39Diluted
    
    $
    .16
    
    
    $
    .17
    
    
    $
    .38
    
    
    $
    .39Weighted average common shares
    
    
    18,940
    
    
    
    20,112
    
    
    
    19,593
    
    
    
    20,082Weighted average common and common
equivalent shares
    
    
    18,952
    
    
    
    20,126
    
    
    
    19,607
    
    
    
    20,111
  4




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30,2008
    
    
    2007(Unaudited)(In thousands)Cash flows from operating activities:Cash provided by operating activities
    
    $
    18,185
    
    
    $
    16,955Cash flows from investing activities:Acquisition of property and equipment
    
    
    (5,134
    )
    
    
    (6,180
    )Increase in intangibles and other assets
    
    
    (112
    )
    
    
    (542
    )Acquisition of stations
    
    
    (10,944
    )
    
    
    (6,761
    )Other investing activities
    
    
    11
    
    
    
    27Net cash used in investing activities
    
    
    (16,179
    )
    
    
    (13,456
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    5,500
    
    
    
    Payments on long-term debt
    
    
    (1,000
    )
    
    
    (4,000
    )Purchase of shares held in treasury
    
    
    (11,810
    )
    
    
    (126
    )Other financing activities
    
    
    (42
    )
    
    
    190Net cash used in financing activities
    
    
    (7,352
    )
    
    
    (3,936
    )Net decrease in cash and cash equivalents
    
    
    (5,346
    )
    
    
    (437
    )Cash and cash equivalents, beginning of period
    
    
    13,343
    
    
    
    10,799Cash and cash equivalents, end of period
    
    $
    7,997
    
    
    $
    10,362
  5




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Basis of Presentation
    Change in Accounting Estimate
 Accounting Changes and Error Corrections,
 Income Taxes
  Revenue Recognition
 Revenue Recognition Revised and Updated.
 Time Brokerage Agreements
 Accounting for Leases
 6




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 Nonmonetary Asset Exchanges
  2. Recent Accounting Pronouncements
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  An Amendment of ARB No. 151
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Fair Value Measurements
 Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements
 7




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 3. Intangible Assets and Goodwill
 Accounting for Goodwill and Other Intangible Assets,
  
    
    The radio and television broadcasting licenses may be renewed indefinitely at little
cost.
    
    The radio and television broadcasting licenses are essential to our business, and we
intend to renew our licenses indefinitely.
    
    We have never been denied the renewal of a FCC broadcast license.
    
    We do not believe that there will be any compelling challenge to the renewal of our
broadcast licenses.
    
    We do not believe that the technology used in broadcasting will be replaced by another
technology in the foreseeable future.
   4. Common Stock and Treasury Stock
  Common Stock IssuedClass A
    
    
    Class B(Shares in thousands)Balance, January 1, 2007
    
    
    18,892
    
    
    
    2,396Exercised options
    
    
    43
    
    
    
    Conversion of shares
    
    
    8
    
    
    
    (8
    )Issuance of restricted stock
    
    
    36
    
    
    
    5Forfeiture of restricted stock
    
    
    (2
    )
    
    
    Balance, December 31, 2007
    
    
    18,977
    
    
    
    2,393Exercised options
    
    
    19
    
    
    
    Conversion of shares
    
    
    3
    
    
    
    (3
    )Issuance of restricted stock
    
    
    93
    
    
    
    12Forfeiture of restricted stock
    
    
    (12
    )
    
    
    Balance, September 30, 2008
    
    
    19,080
    
    
    
    2,402
  8




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 5. Acquisitions
  2008 Acquisitions
    2007 Acquisitions
      9




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 Condensed Consolidated Balance Sheet of 2008 and 2007 Acquisitions
  Saga Communications, Inc.
 Condensed Consolidated Balance Sheet of 2008 and 2007 Acquisitions
 Acquisitions in2008
    
    
    2007(In thousands)Assets Acquired:Current assets
    
    $
    
    
    
    $
    130Property and equipment
    
    
    56
    
    
    
    931Other assets:Broadcast licenses-Radio segment
    
    
    5,658
    
    
    
    12,210Goodwill-Radio segment
    
    
    5,314
    
    
    
    834Other intangibles, deferred costs and investments
    
    
    
    
    
    
    46Total other assets
    
    
    10,972
    
    
    
    13,090Total assets acquired
    
    
    11,028
    
    
    
    14,151Liabilities Assumed:Current liabilities
    
    
    84
    
    
    
    3,853Total liabilities assumed
    
    
    84
    
    
    
    3,853Net assets acquired
    
    $
    10,944
    
    
    $
    10,298
 Pro Forma Results of Operations for Acquisitions and Dispositions (Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share data)Consolidated Results of OperationsNet operating revenue
    
    $
    36,192
    
    
    $
    36,500
    
    
    $
    105,066
    
    
    $
    107,445Station operating expense
    
    
    26,588
    
    
    
    26,239
    
    
    
    79,255
    
    
    
    79,807Corporate general and administrative
    
    
    2,485
    
    
    
    2,272
    
    
    
    7,611
    
    
    
    7,194Gain on asset exchange
    
    
    (282
    )
    
    
    
    
    
    
    (506
    )
    
    
    Operating income
    
    
    7,401
    
    
    
    7,989
    
    
    
    18,706
    
    
    
    20,444Interest expense
    
    
    1,889
    
    
    
    2,283
    
    
    
    5,760
    
    
    
    6,861Other expense, net
    
    
    
    
    
    
    60
    
    
    
    27
    
    
    
    142Income taxes
    
    
    2,415
    
    
    
    2,315
    
    
    
    5,452
    
    
    
    5,510Net income
    
    $
    3,097
    
    
    $
    3,331
    
    
    $
    7,467
    
    
    $
    7,931Basic earnings per share
    
    $
    .16
    
    
    $
    .17
    
    
    $
    .38
    
    
    $
    .39Diluted earnings per share
    
    $
    .16
    
    
    $
    .17
    
    
    $
    .38
    
    
    $
    .39
 10




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Radio Broadcasting SegmentNet operating revenue
    
    $
    31,306
    
    
    $
    32,186
    
    
    $
    91,316
    
    
    $
    94,563Station operating expense
    
    
    22,717
    
    
    
    22,756
    
    
    
    68,028
    
    
    
    69,281Operating income
    
    $
    8,589
    
    
    $
    9,430
    
    
    $
    23,288
    
    
    $
    25,282
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Television Broadcasting SegmentNet operating revenue
    
    $
    4,886
    
    
    $
    4,314
    
    
    $
    13,750
    
    
    $
    12,882Station operating expense
    
    
    3,871
    
    
    
    3,483
    
    
    
    11,227
    
    
    
    10,526Gain on asset exchange
    
    
    (282
    )
    
    
    
    
    
    
    (506
    )
    
    
    Operating income
    
    $
    1,297
    
    
    $
    831
    
    
    $
    3,029
    
    
    $
    2,356
 Reconciliation of pro forma segment operating income to pro forma consolidated operating
income:
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended September 30, 2008:Net operating revenue
    
    $
    31,306
    
    
    $
    4,886
    
    
    $
    
    
    
    $
    36,192Station operating expense
    
    
    22,717
    
    
    
    3,871
    
    
    
    
    
    
    
    26,588Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,485
    
    
    
    2,485Gain on asset exchange
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Operating income (loss)
    
    $
    8,589
    
    
    $
    1,297
    
    
    $
    (2,485
    )
    
    $
    7,401
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended September 30, 2007:Net operating revenue
    
    $
    32,186
    
    
    $
    4,314
    
    
    $
    
    
    
    $
    36,500Station operating expense
    
    
    22,756
    
    
    
    3,483
    
    
    
    
    
    
    
    26,239Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,272
    
    
    
    2,272Operating income (loss)
    
    $
    9,430
    
    
    $
    831
    
    
    $
    (2,272
    )
    
    $
    7,989
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Nine Months Ended September 30, 2008:Net operating revenue
    
    $
    91,316
    
    
    $
    13,750
    
    
    $
    
    
    
    $
    105,066Station operating expense
    
    
    68,028
    
    
    
    11,227
    
    
    
    
    
    
    
    79,255Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    7,611
    
    
    
    7,611Gain on asset exchange
    
    
    
    
    
    
    (506
    )
    
    
    
    
    
    
    (506
    )Operating income (loss)
    
    $
    23,288
    
    
    $
    3,029
    
    
    $
    (7,611
    )
    
    $
    18,706
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Nine Months Ended September 30, 2007:Net operating revenue
    
    $
    94,563
    
    
    $
    12,882
    
    
    $
    
    
    
    $
    107,445Station operating expense
    
    
    69,281
    
    
    
    10,526
    
    
    
    
    
    
    
    79,807Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    7,194
    
    
    
    7,194Operating income (loss)
    
    $
    25,282
    
    
    $
    2,356
    
    
    $
    (7,194
    )
    
    $
    20,444
 11




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 6. Stock Based Compensation
 Share-Based Payment
 Employee Stock Purchase Plan
  2005 Incentive Compensation Plan
  2003 Stock Option Plan
   Weighted AverageRemaining
    
    
    AggregateNumber of
    
    
    Weighted Average
    
    
    Contractual Term
    
    
    IntrinsicOptions
    
    
    Exercise Price
    
    
    (Years)
    
    
    ValueOutstanding at December 31, 2007
    
    
    2,682,752
    
    
    $
    12.81
    
    
    
    4.4
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    (714,568
    )
    
    
    10.58Forfeited
    
    
    (44,790
    )
    
    
    10.29Outstanding at September 30, 2008
    
    
    1,923,394
    
    
    $
    13.70
    
    
    
    4.7
    
    
    $
    Exercisable at September 30, 2008
    
    
    1,418,266
    
    
    $
    14.97
    
    
    
    3.6
    
    
    $
    
 12




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
  Weighted AverageNumber of
    
    
    Grant Date FairOptions
    
    
    ValueNon-vested at December 31, 2007
    
    
    738,263
    
    
    $
    5.09Granted
    
    
    
    
    
    
    Vested
    
    
    (188,345
    )
    
    
    5.23Forfeited/canceled
    
    
    (44,790
    )
    
    
    5.11Non-vested at September 30, 2008
    
    
    505,128
    
    
    $
    5.03
  2007
    
    2006Grants
    
    GrantsWeighted average grant date fair value per share
    
    $
    4.82
    
    
    $
    4.49Expected volatility
    
    
    36.50
    %
    
    
    37.19
    %Expected term of options (years)
    
    
    7.9
    
    
    
    7.8Risk-free interest rate
    
    
    4.76
    %
    
    
    4.27
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
   WeightedAverageGrant DateShares
    
    
    Fair ValueOutstanding at December 31, 2007
    
    
    164,072
    
    
    $
    10.24Granted
    
    
    105,300
    
    
    
    5.99Vested
    
    
    (41,843
    )
    
    
    10.55Forfeited
    
    
    (12,957
    )
    
    
    9.29Non-vested and outstanding at September 30, 2008
    
    
    214,572
    
    
    $
    8.15
  1997 Non-Employee Director Stock Option Plan
   13




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
  Weighted
    
    
    AggregateNumber of
    
    
    Average Price
    
    
    IntrinsicOptions
    
    
    per Share
    
    
    ValueOutstanding at December 31, 2007
    
    
    23,080
    
    
    $
    0.009
    
    
    $
    135,726Granted
    
    
    
    
    
    
    Exercised
    
    
    (18,945
    )
    
    
    0.009Outstanding and exercisable at September 30, 2008
    
    
    4,135
    
    
    $
    0.009
    
    
    $
    23,534
 7. Long-Term Debt
  September 30,
    
    
    December 31,2008
    
    
    2007(In thousands)Credit Agreement:Reducing revolver facility
    
    $
    133,350
    
    
    $
    128,850Secured debt of affiliate
    
    
    1,061
    
    
    
    1,061134,411
    
    
    
    129,911Amounts payable within one year
    
    
    1,061
    
    
    
    $
    133,350
    
    
    $
    129,911
     14




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 8. Gain on Asset Exchange
 Accounting for
Nonmonetary Transactions, Exchanges of Nonmonetary Assets.
  15




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##### Table of Contents



SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 9. Segment Information
   CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended September 30, 2008:Net operating revenue
    
    $
    31,306
    
    
    $
    4,886
    
    
    $
    
    
    
    $
    36,192Station operating expense
    
    
    22,717
    
    
    
    3,871
    
    
    
    
    
    
    
    26,588Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,485
    
    
    
    2,485Gain on asset exchange
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Operating income (loss)
    
    $
    8,589
    
    
    $
    1,297
    
    
    $
    (2,485
    )
    
    $
    7,401Depreciation and amortization
    
    $
    1,618
    
    
    $
    620
    
    
    $
    54
    
    
    $
    2,292
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended September 30, 2007:Net operating revenue
    
    $
    31,904
    
    
    $
    4,314
    
    
    $
    
    
    
    $
    36,218Station operating expense
    
    
    22,492
    
    
    
    3,483
    
    
    
    
    
    
    
    25,975Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,272
    
    
    
    2,272Operating income (loss)
    
    $
    9,412
    
    
    $
    831
    
    
    $
    (2,272
    )
    
    $
    7,971Depreciation and amortization
    
    $
    1,608
    
    
    $
    405
    
    
    $
    48
    
    
    $
    2,061
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Nine Months Ended September 30, 2008:Net operating revenue
    
    $
    91,316
    
    
    $
    13,750
    
    
    $
    
    
    
    $
    105,066Station operating expense
    
    
    68,028
    
    
    
    11,227
    
    
    
    
    
    
    
    79,255Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    7,611
    
    
    
    7,611Gain on asset exchange
    
    
    
    
    
    
    (506
    )
    
    
    
    
    
    
    (506
    )Operating income (loss)
    
    $
    23,288
    
    
    $
    3,029
    
    
    $
    (7,611
    )
    
    $
    18,706Depreciation and amortization
    
    $
    4,771
    
    
    $
    1,620
    
    
    $
    160
    
    
    $
    6,551Total assets
    
    $
    295,422
    
    
    $
    32,447
    
    
    $
    11,946
    
    
    $
    339,815
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Nine Months Ended September 30, 2007:Net operating revenue
    
    $
    93,640
    
    
    $
    12,882
    
    
    $
    
    
    
    $
    106,522Station operating expense
    
    
    68,460
    
    
    
    10,526
    
    
    
    
    
    
    
    78,986Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    7,194
    
    
    
    7,194Operating income (loss)
    
    $
    25,180
    
    
    $
    2,356
    
    
    $
    (7,194
    )
    
    $
    20,342Depreciation and amortization
    
    $
    4,653
    
    
    $
    1,194
    
    
    $
    146
    
    
    $
    5,993Total assets
    
    $
    283,604
    
    
    $
    32,043
    
    
    $
    15,288
    
    
    $
    330,935
 16




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Item 2.Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Results of Operations
   General
   Radio Segment
      17




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
   18




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Percentage of Consolidated
    
    Percentage of ConsolidatedOperating Income for
    
    Operating Income forthe Nine Months Ended
    
    the Years EndedSeptember 30,
    
    December 31,2008
    
    2007
    
    2007
    
    2006Market:Columbus, Ohio
    
    
    6
    %
    
    
    8
    %
    
    
    7
    %
    
    
    10
    %Manchester, New Hampshire
    
    
    18
    %
    
    
    14
    %
    
    
    15
    %
    
    
    14
    %Milwaukee, Wisconsin
    
    
    35
    %
    
    
    33
    %
    
    
    31
    %
    
    
    30
    %Norfolk, Virginia
    
    
    2
    %
    
    
    7
    %
    
    
    7
    %
    
    
    10
    %
   Percentage of Consolidated
    
    Percentage of ConsolidatedStation Operating Income (*)
    
    Station Operating Income(*)for the Nine Months Ended
    
    for the Years EndedSeptember 30,
    
    December 31,2008
    
    2007
    
    2007
    
    2006Market:Columbus, Ohio
    
    
    4
    %
    
    
    6
    %
    
    
    6
    %
    
    
    8
    %Manchester, New Hampshire
    
    
    11
    %
    
    
    9
    %
    
    
    10
    %
    
    
    9
    %Milwaukee, Wisconsin
    
    
    21
    %
    
    
    21
    %
    
    
    20
    %
    
    
    21
    %Norfolk, Virginia
    
    
    2
    %
    
    
    5
    %
    
    
    4
    %
    
    
    7
    %
 
 *
    
    Operating income plus corporate general and administrative, depreciation and amortization. Television Segment
  19




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Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Results of Operations
  Consolidated Results of Operations
 Three Months EndedSeptember 30,
    
    
    $ Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages and per share information)Net operating revenue
    
    $
    36,192
    
    
    $
    36,218
    
    
    $
    (26
    )
    
    
    (.1
    )%Station operating expense
    
    
    26,588
    
    
    
    25,975
    
    
    
    613
    
    
    
    2.4
    %Corporate G&A
    
    
    2,485
    
    
    
    2,272
    
    
    
    213
    
    
    
    9.4
    %Gain on asset exchange
    
    
    (282
    )
    
    
    
    
    
    
    282
    
    
    
    N/MOperating income
    
    
    7,401
    
    
    
    7,971
    
    
    
    (570
    )
    
    
    (7.2
    )%Interest expense
    
    
    1,889
    
    
    
    2,283
    
    
    
    (394
    )
    
    
    (17.3
    )%Other expense, net
    
    
    
    
    
    
    60
    
    
    
    (60
    )
    
    
    N/MIncome taxes
    
    
    2,415
    
    
    
    2,307
    
    
    
    108
    
    
    
    (4.7
    )%Net income
    
    $
    3,097
    
    
    $
    3,321
    
    
    $
    (224
    )
    
    
    (6.7
    )%Earnings per share (basic and diluted)
    
    $
    .16
    
    
    $
    .17
    
    
    $
    (.01
    )
    
    
    (5.9
    )%
 Radio Broadcasting Segment
 Three Months EndedSeptember 30,
    
    
    $ Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    31,306
    
    
    $
    31,904
    
    
    $
    (598
    )
    
    
    (1.9
    )%Station operating expense
    
    
    22,717
    
    
    
    22,492
    
    
    
    225
    
    
    
    1.0
    %Operating income
    
    $
    8,589
    
    
    $
    9,412
    
    
    $
    (823
    )
    
    
    (8.7
    )%
 Television Broadcasting Segment
 Three Months EndedSeptember 30,
    
    
    $ Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    4,886
    
    
    $
    4,314
    
    
    $
    572
    
    
    
    13.3
    %Station operating expense
    
    
    3,871
    
    
    
    3,483
    
    
    
    388
    
    
    
    11.1
    %Gain on asset exchange
    
    
    (282
    )
    
    
    
    
    
    
    282
    
    
    
    N/MOperating income
    
    $
    1,297
    
    
    $
    831
    
    
    $
    466
    
    
    
    56.1
    %
 
 N/M = Not Meaningful Reconciliation of segment operating income to consolidated operating income:
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended September 30, 2008:Net operating revenue
    
    $
    31,306
    
    
    $
    4,886
    
    
    $
    
    
    
    $
    36,192Station operating expense
    
    
    22,717
    
    
    
    3,871
    
    
    
    
    
    
    
    26,588Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,485
    
    
    
    2,485Gain on asset exchange
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Operating income (loss)
    
    $
    8,589
    
    
    $
    1,297
    
    
    $
    (2,485
    )
    
    $
    7,401
 21




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CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended September 30, 2007:Net operating revenue
    
    $
    31,904
    
    
    $
    4,314
    
    
    $
    
    
    
    $
    36,218Station operating expense
    
    
    22,492
    
    
    
    3,483
    
    
    
    
    
    
    
    25,975Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    2,272
    
    
    
    2,272Operating income (loss)
    
    $
    9,412
    
    
    $
    831
    
    
    $
    (2,272
    )
    
    $
    7,971
 Consolidated
     22




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Radio Segment
    Television Segment
    23




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Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
  Consolidated Results of Operations
 Nine Months EndedSeptember 30,
    
    
    $ Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages and per share information)Net operating revenue
    
    $
    105,066
    
    
    $
    106,522
    
    
    $
    (1,456
    )
    
    
    (1.4
    )%Station operating expense
    
    
    79,255
    
    
    
    78,986
    
    
    
    269
    
    
    
    0.3
    %Corporate G&A
    
    
    7,611
    
    
    
    7,194
    
    
    
    417
    
    
    
    5.8
    %Gain on asset exchange
    
    
    (506
    )
    
    
    
    
    
    
    506
    
    
    
    N/MOperating income
    
    
    18,706
    
    
    
    20,342
    
    
    
    (1,636
    )
    
    
    (8.0
    )%Interest expense
    
    
    5,760
    
    
    
    6,861
    
    
    
    (1,101
    )
    
    
    (16.1
    )%Other expense, net
    
    
    27
    
    
    
    142
    
    
    
    (115
    )
    
    
    N/MIncome taxes
    
    
    5,452
    
    
    
    5,468
    
    
    
    (16
    )
    
    
    (0.3
    )%Net income
    
    $
    7,467
    
    
    $
    7,871
    
    
    $
    (404
    )
    
    
    (5.1
    )%Earnings per share (basic and diluted)
    
    $
    .38
    
    
    $
    .39
    
    
    $
    (.01
    )
    
    
    (2.6
    )%
 Radio Broadcasting Segment
 Nine Months EndedSeptember 30,
    
    
    $ Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    91,316
    
    
    $
    93,640
    
    
    $
    (2,324
    )
    
    
    (2.5
    )%Station operating expense
    
    
    68,028
    
    
    
    68,460
    
    
    
    (432
    )
    
    
    (0.6
    )%Operating income
    
    $
    23,288
    
    
    $
    25,180
    
    
    $
    (1,892
    )
    
    
    (7.5
    )%
 Television Broadcasting Segment
 Nine Months EndedSeptember 30,
    
    
    $ Increase
    
    
    % Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    13,750
    
    
    $
    12,882
    
    
    $
    868
    
    
    
    6.7
    %Station operating expense
    
    
    11,227
    
    
    
    10,526
    
    
    
    701
    
    
    
    6.7
    %Gain on asset exchange
    
    
    (506
    )
    
    
    
    
    
    
    506
    
    
    
    N/MOperating income
    
    $
    3,029
    
    
    $
    2,356
    
    
    $
    673
    
    
    
    28.6
    %
 
 N/M
    
    = Not meaningful Reconciliation of segment operating income to consolidated operating income:
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Nine Months Ended September 30, 2008:Net operating revenue
    
    $
    91,316
    
    
    $
    13,750
    
    
    $
    
    
    
    $
    105,066Station operating expense
    
    
    68,028
    
    
    
    11,227
    
    
    
    
    
    
    
    79,255Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    7,611
    
    
    
    7,611Gain on asset exchange
    
    
    
    
    
    
    (506
    )
    
    
    
    
    
    
    (506
    )Operating income (loss)
    
    $
    23,288
    
    
    $
    3,029
    
    
    $
    (7,611
    )
    
    $
    18,706
 24




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CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Nine Months Ended September 30, 2007:Net operating revenue
    
    $
    93,640
    
    
    $
    12,882
    
    
    $
    
    
    
    $
    106,522Station operating expense
    
    
    68,460
    
    
    
    10,526
    
    
    
    
    
    
    
    78,986Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    7,194
    
    
    
    7,194Operating income (loss)
    
    $
    25,180
    
    
    $
    2,356
    
    
    $
    (7,194
    )
    
    $
    20,342
 Consolidated
     25




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Radio Segment
    Television Segment
    26




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Forward-Looking Statements
   Liquidity and Capital Resources
 Debt Arrangements and Debt Service Requirements
     27




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##### Table of Contents



Sources and Uses of Cash
   
    
    On September 5, 2008, in connection with a city of license change for WJZK(FM), we
exchanged $205,000 in cash and a tower, antenna and transmitter with a fair market value
(which approximates cost) of approximately $1,591,000, with another radio station.
    
    On January 21, 2004, we entered into agreements to acquire an FM radio station (WOXL-FM)
serving the Asheville, North Carolina market. On November 1, 2002 we began providing
programming under a Sub-Time Brokerage Agreement to WOXL-FM, and on January 31, 2008 we
closed on the acquisition for approximately $9,463,000 of which approximately $9,354,000
was paid in 2008 and $109,000 was paid in prior years.
    
    On January 31, 2008, in connection with the 2006 acquisition of one FM radio station
(WTMT-FM) serving the Tazewell, Tennessee market for approximately $4,186,000, we paid the
seller $1,350,000, which had been recorded as a note payable at December 31, 2007. We
relocated the tower to Weaverville, North Carolina (serving the Asheville, North Carolina
market) and started broadcasting in Asheville on June 8, 2007.
      28




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Summary Disclosures About Contractual Obligations and Commercial Commitments
   Critical Accounting Policies and Estimates
  Inflation
  
 Item 3.Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.Controls and Procedures
  29




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PART II  OTHER INFORMATION
 
 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)July 1  July 31, 2008
    
    
    201,663
    
    
    $
    5.812
    
    
    
    201,663
    
    
    $
    29,542,700August 1  August 31, 2008
    
    
    1,226,793
    
    
    $
    5.638
    
    
    
    1,226,793
    
    
    $
    22,625,710September 1  September 30, 2008
    
    
    119,938
    
    
    $
    5.736
    
    
    
    119,938
    
    
    $
    21,937,759Total
    
    
    1,548,394
    
    
    $
    5.669
    
    
    
    1,548,394
    
    
    $
    21,937,759
 
 (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. 
 Item 6. Exhibits
 4(f)
    
    Assignment and Acceptance dated as of September 29, 2008, under the Credit Agreement dated as
of July 29, 2003, among the Company, the Lenders party thereto, Union Bank of California,
N.A., as Syndication Agent, Bank of America, N.A., as Documentation Agent, and The Bank of New
York Mellon, formerly The Bank of New York, as Administrative Agent.
 31.1
    
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended.
 31.2
    
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended.
 32
    
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 30




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SIGNATURES
  SAGA COMMUNICATIONS, INCDate: November 10, 2008
    /s/ SAMUEL D. BUSHSamuel D. BushSenior Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer)Date: November 10, 2008
    /s/ CATHERINE A. BOBINSKICatherine A. BobinskiVice President, Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer) 31