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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 September 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
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Grosse Pointe Farms, Michigan 48236
(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 .
--- ---
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 October 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--September 30,
1997 and December 31, 1996 3
Condensed consolidated statements of income --Three
and nine months ended September 30, 1997 and 1996 5
Condensed consolidated statements of cash flows -- Nine
months ended September 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 6. Exhibits and Reports on Form 8-K 17
Signatures 18
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Saga Communications, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and temporary investments $ 3,188 $ 4,339
Accounts receivable, net 12,202 11,629
Prepaid expenses 1,273 1,100
Other current assets 1,230 1,007
--------------------------
Total current assets 17,893 18,075
Property and equipment 69,757 63,031
Less accumulated depreciation (35,677) (33,327)
--------------------------
Net property and equipment 34,080 29,704
Other assets:
Excess of cost over fair value of
assets acquired, net 19,554 20,047
Broadcast licenses, net 32,083 20,906
Other intangibles, net 6,533 7,683
--------------------------
Total other assets 58,170 48,636
--------------------------
$110,143 $ 96,415
==========================
See notes to unaudited condensed consolidated financial statements.
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Saga Communications, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------------------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 650 $ 1,008
Other current liabilities 6,040 4,671
Current portion of long-term debt 6,813 1,399
-------------------------
Total current liabilities 13,503 7,078
Deferred income taxes 3,986 3,408
Long-term debt 55,481 52,355
Broadcast program rights 325 461
STOCKHOLDERS' EQUITY:
Common stock 101 100
Additional paid-in capital 36,513 35,864
Note receivable from principal stockholder (790) (790)
Retained earnings (deficit) 1,024 (2,061)
-------------------------
Total stockholders' equity 36,848 33,113
-------------------------
$110,143 $96,415
=========================
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
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net operating revenue $17,091 $15,021 $48,114 $39,979
Station operating expense:
Programming and technical 3,928 3,583 11,282 9,399
Selling 4,317 3,750 13,247 10,766
Station general and administrative 2,486 2,223 7,441 6,007
--------------------------------------------------------------
Total station operating expense 10,731 9,556 31,970 26,172
--------------------------------------------------------------
Station operating income before corporate
general and administrative, depreciation
and amortization 6,360 5,465 16,144 13,807
Corporate general and administrative 959 994 2,840 2,634
Depreciation and amortization 1,520 1,450 4,252 4,022
--------------------------------------------------------------
Operating profit 3,881 3,021 9,052 7,151
Other expenses:
Interest expense 1,325 1,154 3,708 2,667
Loss (gain) on the sale of assets - (3) 7 17
--------------------------------------------------------------
Income before income tax 2,556 1,870 5,337 4,467
Income tax provision 1,077 800 2,252 1,910
--------------------------------------------------------------
Net income $ 1,479 $ 1,070 $ 3,085 $ 2,557
==============================================================
Net income per common share (primary and
fully diluted) $ .14 $ .10 $ .30 $ .25
==============================================================
Weighted average common and common
equivalents outstanding (Note 3) 10,329 10,259 10,296 10,234
==============================================================
</TABLE>
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
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
-----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash provided by operating activities $ 8,139 $ 5,968
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (2,121) (1,285)
Proceeds from sale of assets 304 20
Increase in intangibles and other assets (522) (4,118)
Acquisition of stations (15,383) (16,982)
-----------------------
Net cash used in investing activities (17,722) (22,365)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 11,250 19,384
Payments on long-term debt (3,210) (2,874)
Net proceeds from exercise of stock options 392 159
-----------------------
Net cash provided by financing activities 8,432 16,669
-----------------------
Net increase (decrease) in cash and temporary
investments (1,151) 272
Cash and temporary investments, beginning of
period 4,339 3,221
-----------------------
Cash and temporary investments, end of period $ 3,188 $ 3,493
=======================
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 nine months ended September 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. COMMITMENTS
On July 7, 1997, the Company entered into an agreement to purchase an FM radio
station (WQLL-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. SUBSEQUENT EVENTS
On October 22, 1997 the Company signed a letter of intent to acquire the assets
of a regional and state news and sports information network (The Illinois Radio
Network) serving more than 45 radio stations throughout the state of Illinois
for $1,750,000. The transaction is subject to certain conditions, including the
completion of a definitive asset purchase agreement, and is expected to close
during the fourth quarter of 1997.
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Saga Communications, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
Unaudited
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.
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 stations 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 RESULTS
OF OPERATIONS
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. In October, 1997 the Company signed a letter of intent to
purchase a regional and state news and sports information network serving more
than 45 radio stations throughout the state of Illinois.
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 nine month periods ended September
30, 1997 and 1996, none of the Company's
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operating locations represented more that 15% of the Company's station operating
income, other than the Columbus and Milwaukee stations. For the nine months
ended September 30, 1997 and 1996, Columbus accounted for an aggregate of 25%
and 22%, respectively, and Milwaukee accounted for an aggregate of 26% and 25%,
respectively, of the Company's station operating income. While radio revenues in
each of the Columbus and Milwaukee markets have remained relatively stable
historically, an adverse change in these radio markets or these locations'
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 nine months ended
September 30, 1997 and 1996, approximately 81% and 83%, 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 SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
For the three months ended September 30, 1997, the Company's net operating
revenue was $17,091,000 compared with $15,021,000 for the three months ended
September 30, 1996, an increase of $2,070,000 or 14%. Approximately $807,000 or
39% 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 an 8.4% 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.
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Station operating expense (i.e., programming, technical, selling and
station general and administrative expenses) increased by $1,175,000 or 12% to
$10,731,000 for the three months ended September 30, 1997, compared with
$9,556,000 for the three months ended September 30, 1996. Of the total increase,
approximately $816,000 or 69% was the result of the impact of the operation of
stations which were not owned or operated by the Company for the entire
comparable period in 1996. The remaining balance of the increase in station
operating expense of $360,000 represents a total increase of 3.8% in stations
owned and operated by the Company for the entire comparable period in 1996, as a
result of the related increase in revenue.
Operating profit increased by $860,000 or 28.5% to $3,881,000 for the three
months ended September 30, 1997, compared with $3,021,000 for the three months
ended September 30, 1996. The improvement was primarily the result of the
$2,070,000 increase in net operating revenue, offset by the $1,175,000 increase
in station operating expense and a $70,000 increase in depreciation and
amortization expense, and a $35,000 decrease in corporate general and
administrative charges. The increase in depreciation and amortization expense
was principally the result of the Company's recent acquisitions. The decrease in
corporate general and administrative charges was primarily attributable to a
decrease in non-recurring charges associated with certain employee benefit
related matters incurred in 1996, offset by deferred compensation charges and
additional costs due to the growth of the Company as a result of the recent
acquisitions.
The Company generated net income in the amount of approximately $1,479,000
($0.14 per share) during the three months ended September 30, 1997, compared
with net income of $1,070,000 ($0.10 per share) for the three months ended
September 30, 1996, an increase of $409,000 or 38%. The increase in net income
was principally the result of the $860,000 improvement in operating profit
offset by a $171,000 increase in interest costs resulting primarily from an
increase in borrowed funds to finance the Company's recent acquisitions, and a
$277,000 increase in income taxes directly associated with the improved
operating performance of the Company.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
For the nine months ended September 30, 1997, the Company's net operating
revenue was $48,114,000 compared with $39,979,000 for the nine months ended
September 30, 1996, an increase of $8,135,000 or 20%. Approximately $5,356,000
or 66% of the increase was attributable to revenue generated by stations which
were not owned or operated by the Company for the entire comparable period in
1996. The balance of the increase in net operating revenue represented a 7%
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.
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Station operating expense (i.e., programming, technical, selling and
station general and administrative expenses) increased by $5,798,000 or 22% to
$31,970,000 for the nine months ended September 30, 1997, compared with
$26,172,000 for the nine months ended September 30, 1996. Of the total increase,
approximately $4,709,000 or 81% was the result of the impact of the operation of
stations which were not owned or operated by the Company for the entire
comparable period in 1996. The remaining balance of the increase in station
operating expense of $1,089,000 represents a total increase of 4% 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 $1,901,000 or 27% to $9,052,000 for the nine
months ended September 30, 1997, compared with $7,151,000 for the nine months
ended September 30, 1996. The improvement was primarily the result of the
$8,135,000 increase in net operating revenue, offset by the $5,798,000 increase
in station operating expense, a $206,000 increase in corporate general and
administrative charges and a $230,000 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 $3,085,000
($0.30 per share) during the nine months ended September 30, 1997, compared with
net income of $2,557,000 ($0.25 per share) for the nine months ended September
30, 1996, an increase of $528,000 or 21%. The increase in net income was
principally the result of the $1,901,000 improvement in operating profit offset
by a $1,041,000 increase in interest costs resulting primarily from an increase
in borrowed funds to finance the Company's recent acquisitions, and a $342,000
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 September 30, 1997, the
Company had $62,294,000 of long-term debt (including the current portion
thereof) outstanding and approximately $47,250,000 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
September 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.
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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 is required to be reduced
quarterly 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.
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 September 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 (5.7% at September 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 $123,000 in additional
interest expense was recognized as a result of the interest rate swap agreement
for the nine months ended September 30, 1997 and an aggregate amount of $323,000
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 nine months ended September 30, 1997 and 1996, the Company had net
cash flows from operating activities of $8,139,000 and $5,968,000, 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.
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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 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 (WQLL-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.
On October 22, 1997 the Company signed a letter of intent to acquire the
assets of a regional and state news and sports information network (The Illinois
Radio Network) serving more than 45 radio stations throughout the state of
Illinois for $1,750,000. The transaction is subject to certain conditions,
including the completion of a definitive asset purchase agreement, and is
expected to close during the fourth quarter of 1997.
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.
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The Company's capital expenditures for the nine months ended September 30,
1997 were approximately $2,121,000 ($1,285,000 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.
16
<PAGE> 17
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) Reports on Form 8-K
None
17
<PAGE> 18
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: November 14, 1997 /s/ Samuel D. Bush
------------------------------------------
Samuel D. Bush
Chief Financial Officer, Vice President,
and Treasurer
(Principal Financial Officer)
Date: November 14, 1997 /s/ Catherine A. Bobinski
------------------------------------------
Catherine A. Bobinski
Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
18
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0
0
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