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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period ended June 30, 1997
or
[ ] 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.
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(Exact name of registrant as specified in its charter)
Delaware 38-3042953
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
73 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236
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(Address of principal executive offices) (Zip Code)
(313) 886-7070
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
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The number of shares of the registrant's Class A Common Stock, $.01 par value,
and Class B Common Stock, $.01 par value, outstanding as of July 31, 1997 was
8,947,256 and 1,208,510, respectively.
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INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 1997
and December 31, 1996 3
Condensed consolidated statements of income --Three
and six months ended June 30, 1997 and 1996 5
Condensed consolidated statements of cash flows -- Six
months ended June 30, 1997 and 1996 6
Notes to unaudited condensed consolidated financial
statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Saga Communications, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
JUNE 30, DECEMBER 31,
1997 1996
-----------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and temporary investments $ 2,157 $ 4,339
Accounts receivable, net 12,792 11,629
Prepaid expenses 1,069 1,100
Other current assets 1,255 1,007
-----------------------
Total current assets 17,273 18,075
Property and equipment 68,907 63,031
Less accumulated depreciation (34,853) (33,327)
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Net property and equipment 34,054 29,704
Other assets:
Excess of cost over fair value of
assets acquired, net 19,718 20,047
Broadcast licenses, net 32,349 20,906
Other intangibles, net 6,741 7,683
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Total other assets 58,808 48,636
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$110,135 $96,415
=======================
See notes to unaudited condensed consolidated financial statements.
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Saga Communications, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
JUNE 30, DECEMBER 31,
1997 1996
--------------------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 742 $ 1,008
Other current liabilities 5,834 4,671
Current portion of long-term debt 5,482 1,399
-----------------------
Total current liabilities 12,058 7,078
Deferred income taxes 3,691 3,408
Long-term debt 58,992 52,355
Broadcast program rights 361 461
STOCKHOLDERS' EQUITY:
Common stock 101 100
Additional paid-in capital 36,178 35,864
Note receivable from principal stockholder (790) (790)
Accumulated deficit (456) (2,061)
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Total stockholders' equity 35,033 33,113
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$110,135 $96,415
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Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to unaudited condensed consolidated financial statements.
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Saga Communications, Inc.
Condensed Consolidated Statements of Income
(in thousands except per share data)
Unaudited
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
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Net operating revenue $17,508 $14,003 $31,023 $24,958
Station operating expense:
Programming and technical 3,686 2,944 7,354 5,816
Selling 5,132 3,922 8,930 7,016
Station general and administrative 2,414 1,887 4,955 3,784
-------------------------------------------------
Total station operating expense 11,232 8,753 21,239 16,616
-------------------------------------------------
Station operating income before corporate
general and administrative,
depreciation and amortization 6,276 5,250 9,784 8,342
Corporate general and administrative 1,074 892 1,881 1,640
Depreciation and amortization 1,450 1,303 2,732 2,572
-------------------------------------------------
Operating profit 3,752 3,055 5,171 4,130
Other expenses:
Interest expense 1,172 780 2,383 1,513
Loss on the sale of assets 1 17 7 20
-------------------------------------------------
Income before income tax 2,579 2,258 2,781 2,597
Income tax provision 1,087 965 1,175 1,110
-------------------------------------------------
Net income $ 1,492 $ 1,293 $ 1,606 $ 1,487
=================================================
Net income per common share (primary and
fully diluted) $ .15 $ .13 $ .16 $ .15
=================================================
Weighted average common and common
equivalents outstanding (Note 3) 10,285 10,246 10,280 10,218
=================================================
See notes to unaudited condensed consolidated financial statements.
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Saga Communications, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Unaudited
SIX MONTHS ENDED
JUNE 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Cash provided by operating activities $ 4,277 $ 3,335
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,274) (899)
Proceeds from sale of assets 306 --
Increase in intangibles and other assets (430) (2,955)
Acquisition of stations (15,383) (16,982)
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Net cash used in investing activities (16,781) (20,836)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 11,250 18,848
Payments on long-term debt (1,030) (2,359)
Net proceeds from exercise of stock options 102 134
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Net cash provided by financing activities 10,322 16,623
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Net decrease in cash and temporary investments (2,182) (878)
Cash and temporary investments, beginning of period 4,339 3,221
------------------------
Cash and temporary investments, end of period $ 2,157 $ 2,343
------------------------
See notes to unaudited condensed consolidated financial statements.
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Saga Communications, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Saga Communications, Inc.
Annual Report (Form 10-K) for the year ended December 31, 1996.
In February, 1997 SFAS No. 128 "Earnings Per Share" was issued effective for
fiscal years beginning after December 15, 1997. Adoption of this statement is
not expected to have a material effect on the Company.
The Company enters into interest-rate swap agreements to modify the interest
characteristics of its outstanding debt. Each interest rate swap agreement is
designated with all or a portion of the principal balance and term of a specific
debt obligation. These agreements involve the exchange of amounts based on a
fixed interest rate for amounts based on variable interest rates over the life
of the agreement without an exchange of the notional amount upon which the
payments are based. The differential to be paid or received as interest rates
change is accrued and recognized as an adjustment of the interest expense
related to the debt (the accrual accounting method). The related amount payable
to or receivable from counterparties is included in other liabilities or assets.
The fair values of the swap agreements are not recognized in the financial
statements. Gains and losses on terminations of interest-rate swap agreements
are deferred as an adjustment to interest expense related to the debt over the
remaining term of the original contract life of the terminated swap agreement.
In the event of the early extinguishment of a designated debt obligation, any
realized or unrealized gain or loss from the swap would be recognized in income
coincident with the extinguishment. Any swap agreements that are not designated
with outstanding debt or notional amounts (or durations) of interest-rate swap
agreements in excess of the principal amounts (or maturities) of the underlying
debt obligations are recorded as an asset or liability at fair value, with
changes in fair value recorded in other income or expense (the fair value
method).
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Saga Communications, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
Unaudited
2. INCOME TAXES
The Company's effective tax rate is higher than the statutory rate as a result
of certain non-deductible depreciation and amortization expenses and the
inclusion of state taxes in the income tax amount.
3. STOCK SPLIT
On April 1, 1997 the Company consummated a five-for-four split of its Class A
and Class B Common Stock, resulting in additional shares being issued of
1,772,004 and 241,702, respectively, for holders of record on March 17, 1997.
All share and per share information in the accompanying financial statements has
been restated retroactively to reflect the split. The common stock and
accumulated deficit accounts at December 31, 1996 reflect the retroactive
capitalization of the split.
4. SUBSEQUENT EVENT
On July 7, 1997, the Company entered into an agreement to purchase an FM radio
station (WOXF-FM) serving the Manchester, New Hampshire market for approximately
$3,300,000. The transaction is subject to the approval of the Federal
Communications Commission. The Company began operating the radio station under
the terms of a local market agreement on July 1, 1997, which is expected to
remain in effect until such time as the Company concludes its pending
acquisition of the station.
5. STATION ACQUISITIONS
The Company acquired an FM radio station (KAZR-FM) serving the Des Moines, Iowa
market on March 14, 1997. The purchase price was approximately $2,700,000. The
Company began operating the radio station under the terms of a local market
agreement on August 1, 1996, which remained in effect until such closing.
The Company acquired an FM radio station (KLTI-FM) serving the Des Moines, Iowa
market on April 17, 1997. The purchase price was approximately $3,200,000. The
Company began operating the radio station under the terms of a local market
agreement on January 1, 1997, which remained in effect until such closing.
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Saga Communications, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
Unaudited
5. STATION ACQUISITIONS (CONTINUED)
The Company acquired two AM and two FM radio stations (WTAX-AM, WDBR-FM,
WVAX-AM, and WYXY-FM) serving the Springfield, Illinois market on May 5, 1997.
The purchase price was approximately $6,000,000. The Company began operating the
radio station under the terms of a local market agreement on July 1, 1996, which
remained in effect until such closing.
The Company acquired two FM radio stations (WFMR-FM and WXPT-FM) serving the
Milwaukee, Wisconsin market on May 9, 1997. The purchase price was approximately
$5,000,000.
The acquisitions have been accounted for as purchases, and accordingly, the
total costs were allocated to the acquired assets and assumed liabilities based
on their estimated fair values as of the acquisition dates. The excess of
consideration paid over the estimated fair value of net assets acquired has been
recorded as broadcast licenses. The condensed consolidated statements of income
include the operating results of the acquired businesses from their respective
dates of acquisition or operation under the terms of local market agreements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto of Saga
Communications, Inc. and its subsidiaries contained elsewhere herein.
In June, 1996, the Company acquired two radio stations in Yankton, South
Dakota serving the Sioux City, Iowa market and two radio stations in Portland,
Maine. In March, 1997 the Company acquired an FM radio station serving the Des
Moines, Iowa market. In April, 1997 the Company acquired another FM radio
station serving the Des Moines, Iowa market. In May, 1997 the Company acquired
four radio stations serving the Springfield, Illinois market, and two radio
stations serving the Milwaukee, Wisconsin market. In July, 1997 the Company
entered into an agreement to purchase a radio station serving the Manchester,
New Hampshire market
GENERAL
The Company's financial results are dependent on a number of factors, the
most significant of which is the ability to generate advertising revenue through
rates charged to advertisers. The rates a station is able to charge are, in
large part, based on a station's ability to attract audiences in the demographic
groups targeted by its advertisers, as measured principally by quarterly reports
by independent national rating services. Various factors affect the rate a
station can charge, including the general strength of the local and national
economies, population growth, ability to provide popular programming, local
market competition, relative efficiency of radio and/or broadcasting compared to
other advertising media, signal strength and government regulation and policies.
The primary operating expenses involved in owning and operating radio stations
are employee salaries, depreciation and amortization, programming expenses,
solicitation of advertising, and promotion expenses. In addition to these
expenses, owning and operating television stations involve the cost of acquiring
certain syndicated programming.
During the years ended December 31, 1996 and 1995, none of the Company's
operating locations represented more than 15% of the Company's station operating
income (i.e., net operating revenue less station operating expense), other than
the Columbus and Milwaukee stations. For the years ended December 31, 1996 and
1995, Columbus accounted for an aggregate of 22% and 30%, respectively, and
Milwaukee accounted for an aggregate of 23% and 22%, respectively, of the
Company's station operating income. For the six month periods ended June 30,
1997 and 1996, none of the Company's operating locations represented more that
15% of the Company's station operating income, other than the Columbus and
Milwaukee stations. For the six months ended June 30, 1997 and 1996, Columbus
accounted for an aggregate of 25% and 22%, respectively, and Milwaukee accounted
for an aggregate of 25% and 25%, respectively, of the Company's station
operating income. While radio revenues in each of the Columbus and Milwaukee
markets
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have remained relatively stable historically, an adverse change in these radio
markets or these location's relative market position could have a significant
impact on the Company's operating results as a whole.
Because audience ratings in the local market are crucial to a station's
financial success, the Company endeavors to develop strong listener/viewer
loyalty. The Company believes that the diversification of formats on its radio
stations helps the Company to insulate itself from the effects of changes in
musical tastes of the public on any particular format.
The number of advertisements that can be broadcast without jeopardizing
listening/viewing levels (and the resulting ratings) is limited in part by the
format of a particular radio station and, in the case of television stations, by
restrictions imposed by the terms of certain network affiliation and syndication
agreements. The Company's stations strive to maximize revenue by constantly
managing the number of commercials available for sale and adjusting prices based
upon local market conditions. In the broadcasting industry, stations often
utilize trade (or barter) agreements to generate advertising time sales in
exchange for goods or services used or useful in the operation of the stations,
instead of for cash. The Company minimizes its use of trade agreements and
historically has sold over 95% of its advertising time for cash.
Most advertising contracts are short-term, and generally run only for a few
weeks. Most of the Company's revenue is generated from local advertising, which
is sold primarily by each station's sales staff. For the six months ended June
30, 1997 and 1996, approximately 81% and 84%, respectively, of the Company's
gross revenue was from local advertising. To generate national advertising
sales, the Company engages an independent advertising sales representative that
specializes in national sales for each of its stations.
The Company's revenue varies throughout the year. Advertising expenditures,
the Company's primary source of revenue, generally have been lowest during the
winter months which comprise the first quarter.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
For the three months ended June 30, 1997, the Company's net operating
revenue was $17,508,000 compared with $14,003,000 for the three months ended
June 30, 1996, an increase of $3,505,000 or 25%. Approximately $2,359,000 or
67.3% of the increase was attributable to revenue generated by stations which
were not owned or operated by the Company for the comparable period in 1996. The
balance of the increase in net operating revenue represented a 8.3% increase in
stations owned and operated by the Company for the entire comparable period,
primarily as a result of increased advertising rates at the majority of the
Company's stations.
Station operating expense (i.e., programming, technical, selling and
station general and administrative expenses) increased by $2,479,000 or 28% to
$11,232,000 for the three months ended June 30, 1997, compared with $8,753,000
for the three months ended June 30, 1996. Of the total increase, approximately
$1,892,000 or 76% was the result of the impact of the operation of stations
which were not owned or operated by the Company for
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the comparable period in 1996. The remaining balance of the increase in station
operating expense of $587,000 represents a total increase of 6.8% in stations
owned and operated by the Company for the comparable period in 1996, as a result
of the related increase in revenue.
Operating profit increased by $697,000 or 23% to $3,752,000 for the three
months ended June 30, 1997, compared with $3,055,000 for the three months ended
June 30, 1996. The improvement was primarily the result of the $3,505,000
increase in net operating revenue, offset by the $2,479,000 increase in station
operating expense, a $182,000 increase in corporate general and administrative
charges and a $147,000 increase in depreciation and amortization expense. The
increase in corporate general and administrative charges was primarily
attributable to deferred compensation charges and additional costs due to the
growth of the Company as a result of the recent acquisitions. The increase in
depreciation and amortization expense was principally the result of the
Company's recent acquisitions.
The Company generated net income in the amount of approximately $1,492,000
($0.15 per share) during the three months ended June 30, 1997, compared with net
income of $1,293,000 ($0.13 per share) for the three months ended June 30, 1996,
an increase of $199,000 or 15.4%. The increase in net income was principally the
result of the $697,000 improvement in operating profit offset by a $392,000
increase in interest costs resulting primarily from an increase in borrowed
funds to finance the Company's recent acquisitions, and a $122,000 increase in
income taxes directly associated with the improved operating performance of the
Company.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
For the six months ended June 30, 1997, the Company's net operating revenue
was $31,023,000 compared with $24,958,000 for the six months ended June 30,
1996, an increase of $6,065,000 or 24%. Approximately $4,551,000 or 75% of the
increase was attributable to revenue generated by stations which were not owned
or operated by the Company for the comparable period in 1996. The balance of the
increase in net operating revenue represented a 6% increase in stations owned
and operated by the Company for the entire comparable period, primarily as a
result of increased advertising rates at the majority of the Company's stations.
Station operating expense (i.e., programming, technical, selling and
station general and administrative expenses) increased by $4,623,000 or 28% to
$21,239,000 for the six months ended June 30, 1997, compared with $16,616,000
for the six months ended June 30, 1996. Of the total increase, approximately
$3,812,000 or 82% was the result of the impact of the operation of stations
which were not owned or operated by the Company for the comparable period in
1996. The remaining balance of the increase in station operating expense of
$811,000 represents a total increase of 5% in stations owned and operated by the
Company for the comparable period in 1996, as a result of the related increase
in revenue.
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Operating profit increased by $1,041,000 or 25% to $5,171,000 for the six
months ended June 30, 1997, compared with $4,130,000 for the six months ended
June 30, 1996. The improvement was primarily the result of the $6,065,000
increase in net operating revenue, offset by the $4,623,000 increase in station
operating expense, a $241,000 increase in corporate general and administrative
charges and a $160,000 increase in depreciation and amortization expense. The
increase in corporate general and administrative charges was primarily
attributable to deferred compensation charges and additional costs due to the
growth of the Company as a result of the recent acquisitions. The increase in
depreciation and amortization expense was principally the result of the
Company's recent acquisitions.
The Company generated net income in the amount of approximately $1,606,000
($0.16 per share) during the six months ended June 30, 1997, compared with net
income of $1,487,000 ($0.15 per share) for the six months ended June 30, 1996,
an increase of $119,000 or 8%. The increase in net income was principally the
result of the $1,041,000 improvement in operating profit offset by a $870,000
increase in interest costs resulting primarily from an increase in borrowed
funds to finance the Company's recent acquisitions, and a $65,000 increase in
income taxes directly associated with the improved operating performance of the
Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's policy is generally to repay its long-term debt with excess
cash on hand to reduce its financing costs. As of June 30, 1997, the Company had
$64,474,000 of long-term debt (including the current portion thereof)
outstanding and approximately $44,750,000 of unused borrowing capacity under the
Revolving Loan (as defined below).
The Company has a bank credit agreement (the "Credit Agreement") which
provides two financing facilities (the "Facilities"): a $54,000,000 senior
secured term loan (the "Term Loan") and a $56,000,000 senior secured reducing
revolving/term loan facility (the "Revolving Loan"). The Facilities mature June
30, 2003. The Company's indebtedness under the Facilities is secured by a first
priority lien on substantially all the assets of the Company and its
subsidiaries, by a pledge of its subsidiaries' stock and by a guarantee of its
subsidiaries.
The Revolving Loan has a total commitment of $56,000,000, of which
$51,000,000 may be used for permitted acquisitions and related transaction
expenses and $5,000,000 may be used for working capital needs and stand-by
letters of credit. On June 30, 1998 the Revolving Loan will convert to a five
year term loan. The outstanding amount of the Term Loan is required to be
reduced quarterly in amounts ranging from 2.5% to 5% of the initial commitment
and the outstanding amount of the Revolving Loan will be required to be reduced
quarterly commencing September 30, 1997 in amounts ranging from 1.25% to 5% of
the initial commitment. In addition, the Facilities may be further reduced by
specified percentages of Excess Cash Flow (as defined in the Credit Agreement)
based on leverage ratios.
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Interest rates under the Facilities are payable, at the Company's option, at
alternatives equal to LIBOR plus 1.125% to 1.75% or the prime rate plus
0% to .5%. The spread over LIBOR and the prime rate vary from time to time,
depending upon the Company's financial leverage. The Company also pays quarterly
commitment fees equal to 1/2% per annum on the aggregate unused portion of the
Revolving Loan.
The Credit Agreement contains a number of financial covenants which, among
other things, require the Company to maintain specified financial ratios and
impose certain limitations on the Company with respect to investments,
additional indebtedness, dividends, distributions, guarantees, liens and
encumbrances.
At June 30, 1997, the Company had an interest rate swap agreement with a
total notional amount of $32,000,000 that it uses to convert the variable
Eurodollar interest rate of a portion of its bank borrowings to a fixed interest
rate. The swap agreement was entered into to reduce the risk to the Company of
rising interest rates. In accordance with the terms of the swap agreement, dated
November 21, 1995, the Company pays 6.15% calculated on a $32,000,000 notional
amount. The Company receives LIBOR (5.8% at June 30, 1997) calculated on a
notional amount of $32,000,000. Net receipts or payments under the agreement are
recognized as an adjustment to interest expense. The swap agreement expires in
December 1999. As the LIBOR increases, interest payments received and the market
value of the swap position increase. Approximately $94,000 in additional
interest expense was recognized as a result of the interest rate swap agreement
for the six months ended June 30, 1997 and an aggregate amount of $294,000 in
additional interest expense has been recognized since the inception of the
agreement.
During the years ended December 31, 1996, and 1995, the Company had net
cash flows from operating activities of $7,679,000, and $9,483,000,
respectively. During the six months ended June 30, 1997 and 1996, the Company
had net cash flows from operating activities of $4,277,000 and $3,335,000,
respectively. The Company believes that cash flow from operations will be
sufficient to meet quarterly debt service requirements for interest and
scheduled payments of principal under the Credit Agreement. If such cash flow is
not sufficient to meet such debt service requirements, the Company may be
required to sell additional equity securities, refinance its obligations or
dispose of one or more of its properties in order to make such scheduled
payments. There can be no assurance that the Company would be able to effect any
such transactions on favorable terms.
In June, 1996, the Company acquired an AM and FM radio station in Yankton,
South Dakota, serving the Sioux City, Iowa market for approximately $7,000,000
and an AM and FM radio station serving the Portland, Maine market for
approximately $10,000,000. The acquisitions were financed by borrowings under
the Company's Term Loan.
The Company acquired an FM radio station (KAZR-FM) serving the Des Moines,
Iowa market on March 14, 1997, an FM radio station (KLTI-FM) serving the Des
Moines, Iowa market on April 17, 1997, two AM and two FM radio stations
(WTAX-AM, WDBR-FM, WVAX-AM, and WYXY-FM) serving the Springfield, Illinois
market on May 5, 1997, and two FM radio stations (WFMR-FM and WXPT-FM) serving
the Milwaukee, Wisconsin market on May 9, 1997. The purchase price of these
acquisitions was approximately $2,700,000, $3,200,000, $6,000,000 and
$5,000,000, respectively. These acquisitions were
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financed through funds generated from operations and additional borrowings of
$11,250,000 under the Revolving Loan.
On July 7, 1997, the Company entered into an agreement to purchase an FM
radio station (WOXF-FM) serving the Manchester, New Hampshire market for
approximately $3,300,000. The transaction is subject to the approval of the
Federal Communications Commission. The Company began operating the radio station
under the terms of a local market agreement on July 1, 1997, which is expected
to remain in effect until such time as the Company concludes it pending
acquisition of the station.
The Company anticipates that the above and any future acquisitions of radio
and television stations will be financed through funds generated from
operations, borrowings under the Revolving Loan, additional debt or equity
financing, or a combination thereof. However, there can be no assurances that
any such financing will be available.
The Company's capital expenditures for the six months ended June 30, 1997
were approximately $1,274,000 ($899,000 in the comparable period in 1996). The
Company anticipates capital expenditures in 1997 to be approximately $2,500,000,
which it expects to finance through funds generated from operations.
INFLATION
The impact of inflation on the Company's operations has not been
significant to date. There can be no assurance that a high rate of inflation in
the future would not have an adverse effect on the Company's operations.
FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. In addition, when used
in this Form 10-Q, words such as "believes," "anticipates," "expects" and
similar expressions are intended to identify forward-looking statements. The
Company cautions that a number of important factors could cause the Company's
actual results for 1997 and beyond to differ materially from those expressed in
any forward looking statements made by or on behalf of the Company. Forward
looking statements involve a number of risks and uncertainties including, but
not limited to, the Company's financial leverage and debt service requirements,
dependence on key stations, U.S. and local economic conditions, the successful
integration of acquired stations, and regulatory matters. The Company cannot
assure that it will be able to anticipate or respond timely to changes in any of
the factors listed above, which could adversely affect the operating results in
one or more fiscal quarters. Results of operations in any past period should not
be considered, in and of itself, indicative of the results to be expected for
future periods. Fluctuations in operating results may also result in
fluctuations in the price of the Company's stock.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on May 12, 1997.
(b) Not applicable
(c) At the Annual Meeting of Stockholders, the stockholders voted on
the following matters: (Does not reflect the five-for-four stock
split effective April 1, 1997)
(1) The six nominees for election as directors for the ensuing
year, and until their successors are elected and qualified,
received the following votes:
Name For Withheld
---- --- --------
Jonathan Firestone* 5,838,654 6,168
Joseph P. Misiewicz* 5,837,279 7,543
Edward K. Christian 6,805,462 6,168
William P. Collatos 6,805,080 6,550
Norman L. McKee 6,805,087 6,543
Gary Stevens 6,804,962 6,668
----------------
* Elected by the holders of Class A Common Stock.
(2) The proposal to ratify the adoption of the 1997 Non-Employee
Directors Stock Option Plan was approved with 15,453,552
votes cast for, 55,195 votes cast against, 4,155 abstentions
and 0 broker non-votes.
(3) The proposal to ratify the selection by the Board of
Directors of Ernst & Young LLP as independent auditors to
audit the Company's books and accounts for the fiscal year
ending December 31, 1997 was approved with 15,509,447 votes
cast for, 1,368 votes cast against, 2,087 abstentions and 0
broker non-votes.
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
--------
10 1997 Non-Employee Directors Stock Option Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAGA COMMUNICATIONS, INC.
Date: August 8, 1997 /s/ Edward K. Christian
-------------------------------------
Edward K. Christian
President, Chief Executive Officer,
and Chairman of the Board
Date: August 8, 1997 /s/ Catherine A. Bobinski
-------------------------------------
Catherine A. Bobinski
Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
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