##### 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, 2011
 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 þ
    
    Non-accelerated filer o
    
    Smaller Reporting Company o(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, 2011 and December 31, 2010
    
    
    3Condensed consolidated statements of income  Three months ended March 31, 2011 and 2010
    
    
    4Condensed consolidated statements of cash flows Three months ended March 31, 2011 and 2010
    
    
    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
    
    
    19Item 4. Controls and Procedures
    
    
    20PART II OTHER INFORMATION
    
    
    20Item 1. Legal Proceedings
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 SAGA COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)
    
    
    (Note)(In thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    12,754
    
    
    $
    12,197Short-term investments
    
    
    1,011
    
    
    
    1,007Accounts receivable, net
    
    
    17,225
    
    
    
    18,985Prepaid expenses and other current assets
    
    
    1,617
    
    
    
    2,002Barter transactions
    
    
    1,791
    
    
    
    1,377Deferred income taxes
    
    
    890
    
    
    
    991Total current assets
    
    
    35,288
    
    
    
    36,559Property and equipment
    
    
    159,565
    
    
    
    158,589Less accumulated depreciation
    
    
    94,721
    
    
    
    93,028Net property and equipment
    
    
    64,844
    
    
    
    65,561Other assets:Broadcast licenses, net
    
    
    90,584
    
    
    
    90,584Other intangibles, deferred costs and investments, net
    
    
    6,836
    
    
    
    7,099Total other assets
    
    
    97,420
    
    
    
    97,683$
    197,552
    
    
    $
    199,803Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    1,435
    
    
    $
    1,683Payroll and payroll taxes
    
    
    5,618
    
    
    
    5,524Other accrued expenses
    
    
    3,077
    
    
    
    3,460Barter transactions
    
    
    2050
    
    
    
    1,641Current portion of long-term debt
    
    
    4,443
    
    
    
    6,121Total current liabilities
    
    
    16,623
    
    
    
    18,429Deferred income taxes
    
    
    7,659
    
    
    
    7,105Long-term debt
    
    
    87,635
    
    
    
    89,957Other liabilities
    
    
    3,850
    
    
    
    4,234Stockholders equityCommon stock
    
    
    53
    
    
    
    53Additional paid-in capital
    
    
    50,460
    
    
    
    50,298Retained earnings
    
    
    59,862
    
    
    
    58,200Treasury stock
    
    
    (28,590
    )
    
    
    (28,473
    )Total stockholders equity
    
    
    81,785
    
    
    
    80,078$
    197,552
    
    
    $
    199,803
   3




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SAGA COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months EndedMarch 31,2011
    
    
    2010(Unaudited)(In thousands, except per share data)Net operating revenue
    
    $
    28,708
    
    
    $
    27,987Station operating expenses
    
    
    22,736
    
    
    
    22,560Corporate general and administrative
    
    
    1,940
    
    
    
    1,882Operating income
    
    
    4,032
    
    
    
    3,545Other expenses, net:Interest expense
    
    
    1,157
    
    
    
    1,519Other (income) expense, net
    
    
    68
    
    
    
    (3,596
    )Income before income tax
    
    
    2,807
    
    
    
    5,622Income tax provision
    
    
    1,145
    
    
    
    2,305Net income
    
    $
    1,662
    
    
    $
    3,317Earnings per shareBasic
    
    $
    0.39
    
    
    $
    0.78Diluted
    
    $
    0.39
    
    
    $
    0.78Weighted average common shares
    
    
    4,237
    
    
    
    4,228Weighted average common and common equivalent shares
    
    
    4,243
    
    
    
    4,229
  4




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SAGA COMMUNICATIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31,2011
    
    
    2010(Unaudited)(In thousands)Cash flows from operating activities:Cash provided by operating activities
    
    $
    5,885
    
    
    $
    7,342Cash flows from investing activities:Acquisition of property and equipment
    
    
    (1,145
    )
    
    
    (845
    )Proceeds from license downgrade
    
    
    
    
    
    
    3,561Other investing activities
    
    
    (66
    )
    
    
    50Net cash (used in) provided by investing activities
    
    
    (1,211
    )
    
    
    2,766Cash flows from financing activities:Payments on long-term debt
    
    
    (4,000
    )
    
    
    (5,000
    )Payments for debt issuance costs
    
    
    
    
    
    
    (1,503
    )Purchase of shares held in treasury
    
    
    (117
    )
    
    
    (78
    )Net cash used in financing activities
    
    
    (4,117
    )
    
    
    (6,581
    )Net increase in cash and cash equivalents
    
    
    557
    
    
    
    3,527Cash and cash equivalents, beginning of period
    
    
    12,197
    
    
    
    12,899Cash and cash equivalents, end of period
    
    $
    12,754
    
    
    $
    16,426
  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 31,2011
    
    
    2010(In thousands, except per share data)Numerator:Net income available to common stockholders
    
    $
    1,662
    
    
    $
    3,317Denominator:Denominator for basic earnings per share-weighted average shares
    
    
    4,237
    
    
    
    4,228Effect of dilutive securities:Common stock equivalents
    
    
    6
    
    
    
    1Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversions
    
    
    4,243
    
    
    
    4,229Basic earnings per share
    
    $
    0.39
    
    
    $
    0.78Diluted earnings per share
    
    $
    0.39
    
    
    $
    0.78
  6




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 Fair Value of Financial Instruments
  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, 2010
    
    
    4,771
    
    
    
    599Conversion of shares
    
    
    1
    
    
    
    (1
    )Forfeiture of restricted stock
    
    
    (2
    )
    
    
    Balance, December 31, 2010
    
    
    4,770
    
    
    
    598Conversion of shares
    
    
    1
    
    
    
    (1
    )Balance, March 31, 2011
    
    
    4,771
    
    
    
    597
  5. Stock-Based Compensation
 2 005 Incentive Compensation Plan
  Stock-Based Compensation
  8




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##### Table of Contents



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, 2011
    
    
    293,993
    
    
    $
    51.70
    
    
    
    3.9
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Forfeited
    
    
    (282
    )
    
    
    37.96Outstanding at March 31, 2011
    
    
    293,711
    
    
    $
    51.71
    
    
    
    3.4
    
    
    $
    Exercisable at March 31, 2011
    
    
    286,701
    
    
    $
    52.05
    
    
    
    3.4
    
    
    $
    
  Weighted AverageNumber of
    
    
    Grant Date FairOptions
    
    
    ValueNon-vested at January 1, 2011
    
    
    35,155
    
    
    $
    18.51Granted
    
    
    
    
    
    
    Vested
    
    
    (27,863
    )
    
    
    18.30Forfeited/canceled
    
    
    (282
    )
    
    
    19.30Non-vested at March 31, 2011
    
    
    7,010
    
    
    $
    19.30
  Weighted AverageGrant Date FairShares
    
    
    ValueOutstanding at January 1, 2011
    
    
    21,120
    
    
    $
    28.73Granted
    
    
    
    
    
    
    Vested
    
    
    (10,632
    )
    
    
    31.28Forfeited
    
    
    (463
    )
    
    
    25.87Non-vested and outstanding at March 31, 2011
    
    
    10,025
    
    
    $
    26.15
  9




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SAGA COMMUNICATIONS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 6. Long-Term Debt
  March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Credit Agreement:Reducing revolver facility
    
    $
    91,000
    
    
    $
    95,000Secured debt of affiliate
    
    
    1,078
    
    
    
    1,07892,078
    
    
    
    96,078Amounts payable within one year
    
    
    4,443
    
    
    
    6,121$
    87,635
    
    
    $
    89,957
       10




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##### Table of Contents



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, 2011:Net operating revenue
    
    $
    24,506
    
    
    $
    4,202
    
    
    $
    
    
    
    $
    28,708Station operating expense
    
    
    19,278
    
    
    
    3,458
    
    
    
    
    
    
    
    22,736Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    1,940
    
    
    
    1,940Operating income (loss)
    
    $
    5,228
    
    
    $
    744
    
    
    $
    (1,940
    )
    
    $
    4,032Depreciation and amortization
    
    $
    1,339
    
    
    $
    412
    
    
    $
    54
    
    
    $
    1,805Total assets
    
    $
    148,859
    
    
    $
    26,833
    
    
    $
    21,860
    
    
    $
    197,552
 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
 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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Percentage of Consolidated
    
    
    Percentage of ConsolidatedNet Operating Revenue for
    
    
    Net Operating Revenuethe Three Months Ended
    
    
    for the Years EndedMarch 31,
    
    
    December 31,2011
    
    
    2010
    
    
    2010
    
    
    2009Market:Bellingham, Washington
    
    
    5
    %
    
    
    5
    %
    
    
    5
    %
    
    
    5
    %Des Moines, Iowa
    
    
    6
    %
    
    
    6
    %
    
    
    6
    %
    
    
    7
    %Manchester, New Hampshire
    
    
    5
    %
    
    
    6
    %
    
    
    6
    %
    
    
    5
    %Milwaukee, Wisconsin
    
    
    12
    %
    
    
    13
    %
    
    
    13
    %
    
    
    13
    %
   Percentage of Consolidated
    
    
    Percentage of ConsolidatedStation Operating Income (*)
    
    
    Station Operating Income(*)for the Three Months Ended
    
    
    for the Years EndedMarch 31,
    
    
    December 31,2011
    
    
    2010
    
    
    2010
    
    
    2009Market:Bellingham, Washington
    
    
    7
    %
    
    
    7
    %
    
    
    7
    %
    
    
    7
    %Des Moines, Iowa
    
    
    4
    %
    
    
    3
    %
    
    
    4
    %
    
    
    7
    %Manchester, New Hampshire
    
    
    8
    %
    
    
    8
    %
    
    
    8
    %
    
    
    7
    %Milwaukee, Wisconsin
    
    
    16
    %
    
    
    20
    %
    
    
    17
    %
    
    
    20
    %
 
 *
    
    Operating income (excluding non-cash impairment charge) plus
corporate general and administrative expenses, depreciation and
amortization, less gain on asset exchange. 13




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Television Segment
          14




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Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Results of Operations
  Consolidated Results of Operations
 Three Months EndedMarch 31,
    
    
    $ Increase
    
    
    % Increase2011
    
    
    2010
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages and per share information)Net operating revenue
    
    $
    28,708
    
    
    $
    27,987
    
    
    $
    721
    
    
    
    2.6
    %Station operating expense
    
    
    22,736
    
    
    
    22,560
    
    
    
    176
    
    
    
    0.8
    %Corporate G&A
    
    
    1,940
    
    
    
    1,882
    
    
    
    58
    
    
    
    3.1
    %Operating income
    
    
    4,032
    
    
    
    3,545
    
    
    
    487
    
    
    
    13.7
    %Interest expense
    
    
    1,157
    
    
    
    1,519
    
    
    
    (362
    )
    
    
    (23.8
    )%Other (income) expense, net
    
    
    68
    
    
    
    (3,596
    )
    
    
    3,664
    
    
    
    N/MIncome tax expense
    
    
    1,145
    
    
    
    2,305
    
    
    
    (1,160
    )
    
    
    (50.3
    )%Net income
    
    $
    1,662
    
    
    $
    3,317
    
    
    $
    (1,655
    )
    
    
    (49.9
    )%Earnings per share (basic and diluted)
    
    $
    .39
    
    
    $
    .78
    
    
    $
    (.39
    )
    
    
    (50.0
    )%
 Radio Broadcasting Segment
 Three Months EndedMarch 31,
    
    
    $ Increase
    
    
    % Increase2011
    
    
    2010
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    24,506
    
    
    $
    24,144
    
    
    $
    362
    
    
    
    1.5
    %Station operating expense
    
    
    19,278
    
    
    
    19,223
    
    
    
    55
    
    
    
    0.3
    %Operating income
    
    $
    5,228
    
    
    $
    4,921
    
    
    $
    307
    
    
    
    6.2
    %
 Television Broadcasting Segment
 Three Months EndedMarch 31,
    
    
    $ Increase
    
    
    % Increase2011
    
    
    2010
    
    
    (Decrease)
    
    
    (Decrease)(In thousands, except percentages)Net operating revenue
    
    $
    4,202
    
    
    $
    3,843
    
    
    $
    359
    
    
    
    9.3
    %Station operating expense
    
    
    3,458
    
    
    
    3,337
    
    
    
    121
    
    
    
    3.6
    %Operating income
    
    $
    744
    
    
    $
    506
    
    
    $
    238
    
    
    
    47.0
    %
 
 N/M = Not Meaningful 15




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##### Table of Contents



Reconciliation of segment operating income (loss) to consolidated operating income:
 CorporateRadio
    
    
    Television
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended March 31, 2011:Net operating revenue
    
    $
    24,506
    
    
    $
    4,202
    
    
    $
    
    
    
    $
    28,708Station operating expense
    
    
    19,278
    
    
    
    3,458
    
    
    
    
    
    
    
    22,736Corporate general and administrative
    
    
    
    
    
    
    
    
    
    
    1,940
    
    
    
    1,940Operating income (loss)
    
    $
    5,228
    
    
    $
    744
    
    
    $
    (1,940
    )
    
    $
    4,032
 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
 Consolidated
     16




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Radio Segment
    Television Segment
    17




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Forward-Looking Statements
   Liquidity and Capital Resources
 Debt Arrangements and Debt Service Requirements
       18




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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
  19




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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, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    14,440,427February 1  February 28, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    14,440,427March 1  March 31, 2011
    
    
    4,035
    
    
    $
    28.95
    
    
    
    4,035
    
    
    $
    14,323,614Total
    
    
    4,035
    
    
    $
    28.95
    
    
    
    4,035
    
    
    $
    14,323,614
 
 (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.
 20




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SIGNATURES
  SAGA COMMUNICATIONS, INCDate: May 10, 2011
    /s/ SAMUEL D. BUSHSamuel D. BushSenior Vice President,  Chief Financial Officer and
Treasurer  (Principal Financial Officer)Date: May 10, 2011
    /s/ CATHERINE A. BOBINSKICatherine A. BobinskiVice President,  Corporate Controller and Chief
Accounting Officer  (Principal Accounting Officer) 21