Saga Communications, Inc. Annual Report 2013

FY2013 Annual Report · Saga Communications, Inc.

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2013 Annual Report

2013 Annual Letter
To our valued shareholders:

I think all of us at some time or other have been haunted by a tune that gets into your brain and then
hangs around for a few days. That has recently happened to me after watching clips of ‘‘Saving Mr. Banks.’’
In the clips there is a scene about Richard and Robert Sherman, the songwriters of
‘‘Supercalifragilisticexpialidocious’’ (Wonderland Music).

That word has been rumbling around in my brain along with me humming ‘‘um diddle diddle diddle um
diddle ay.’’

Then a week or so ago I saw an article in The Economist where the author was using this word to describe
the economy...and thus my thought track paralleled his. I can’t say that 2013 for Saga was ‘‘Supercali,’’
though we are pleased with the results, especially in a non election year. On the other hand, because of the
weather in the Midwest and Northeast at the start of 2014, we are experiencing a ‘‘Fragilistic’’ beginning. We
are up for the 1st quarter, but it is a point or so behind where we projected. However, if we take our view of
the balance of 2014, we can use the Oxford Dictionary’s deﬁnition of the entire word, which is: ‘‘an
expression of excited approval.’’

More about 2013 and 2014, but ﬁrst here is a quick review of how we performed in 2013:

Gross revenue exclusive of political revenue increased 3.3% for the year. Free cash ﬂow for the year was
$21.6 million with net income for the period of $15.3 million. On December 12, 2013, we paid our second
special dividend in the amount of $10.3 million. This follows the special dividend that we paid on
December 3, 2012, in the amount of $7.0 million.

Now, as we know, economies can turn in a matter of days, but what we are seeing bodes well for the
broadcast sector and Saga for the balance of 2014. First off, we have good political races in a number of our
states which are very helpful with meaningful dollars for political advertising. Additionally, I believe that there
is some pent up consumer demand and this bodes well for our clients and their advertising expenditures.

Our business is all about radio, TV, state radio and state farm radio networks. They are fueled by people, and
it is people who listen and watch and respond. They respond to advertising and they respond to what we do
for our communities. Indeed, Saga’s main focus is on the communities that we serve. Without the public good
will and respect for what we do, we could not achieve the level of superiority that we need to outperform in
our markets.

Let me share with you one particular story. For over twenty years our radio station KSTZ (Star 102.5fm) in
Des Moines has supported the community with ‘‘Christmas Wish.’’ Each year hundreds of letters are received
from the community asking for help and support during the holiday season — from Bobby’s new bike to a
mother requesting a laptop for her under-privileged school aged son. A committee of staff members gets
together in the conference room to open and read all of the letters and work together to answer as many
requests as possible. In over 20 years the station has never received a wish quite like the one that follows.
One month before she passed away in August of 2011 from ovarian cancer at the age of 46, Brenda Schmitz
wrote a letter to Star 102.5, KSTZ and gave the letter to a friend and asked her to deliver it once her husband
David had found someone else to love him and to help take care of their four boys. When the letter was read
at the station there wasn’t a dry eye in the room. Brenda’s wishes were ﬁnally revealed when the station
brought her husband David into the studio and read the note to him on air. The ﬁrst of those wishes was for
the new love in David’s life to receive a day or, better yet, a weekend of pampering in all aspects of her life
to thank her for being a step mother to the boys. The second wish was that the family be granted a magical
trip somewhere where they could all enjoy each other’s company and companionship. Her third wish was for
a night out of food and drinks and fun for the cancer doctors and nurses who cared for her at the hospital.

We granted it all — a day at a spa, a trip to Disney World and more. People all over the world shared in this
amazing story — some 51,000 websites and an estimated 20 million views. Additionally, all of the major TV
networks covered the story.

Even just typing this brings a sense of joy to me that I, in a small way, am part of the station that made all of
the above possible.

We are very proud of our people and humbled that Brenda chose us.

That’s broadcasting...and that’s our mission and has been since this company was started 28 years ago. We
exist and prosper because of a laser like focus on service and outreach. In truth, it is a simple statement, and
simple is good for us.

We continue to promise this commitment as we understand that, if we win the hearts and minds of our
communities, listeners and viewers will be loyal to us. That helps us to effectively sell the advertising that
allows us to proﬁt as well as to continue to invest in our communities.

Don’t just take my word for it. If you happen to live or visit one of our communities, take a few minutes and
stop by our studios. Our managers will gladly meet you, show you around, and no doubt brag about what
makes their stations integral in their markets.

2014 will be a good year for us. There are many variables that have yet to determine how good it will be but,
rest assured, we will be back again next year with the continuing saga...of Saga Communications.

Ed Christian
President/CEO

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark one)
(cid:2)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the ﬁscal year ended December 31, 2013
OR

□

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period for

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)
73 Kercheval Avenue
Grosse Pointe Farms, Michigan
(Address of principal executive offıces)

38-3042953
(I.R.S. Employer Identiﬁcation No.)

48236
(Zip Code)

Registrant’s telephone number, including area code:
(313) 886-7070
Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Class A Common Stock, $.01 par value

NYSE MKT
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities

Act. Yes □ No (cid:4)

Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the

Act. Yes □ No (cid:4)

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 (cid:4) No □

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such ﬁles). Yes (cid:4) No □
Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Rule 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in deﬁnitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendments to this Form 10-K. □

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, or a smaller

reporting company. See the deﬁnitions of ‘‘large accelerated ﬁler,’’ ‘‘accelerated ﬁler’’ and ‘‘smaller reporting company’’ in
Rule 12b-2 of the Exchange Act.
Large accelerated ﬁler □

Accelerated ﬁler (cid:4) Non-accelerated ﬁler □

Smaller reporting company □

(Do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Act). Yes □ No (cid:4)
Aggregate market value of the Class A Common Stock and the Class B Common Stock (assuming conversion thereof into
Class A Common Stock) held by nonaffiliates of the registrant, computed on the basis of the closing price of the Class A Common
Stock on June 28, 2013 on the NYSE MKT: $215,596,299.

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 March 3, 2014 was 4,920,640 and 815,945, respectively.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2014 Annual Meeting of Stockholders (to be ﬁled with the Securities and Exchange
Commission not later than 120 days after the end of the Company’s ﬁscal year) are incorporated by reference in Part III hereof.

[This page intentionally left blank.]

Saga Communications, Inc.
2013 Form 10-K Annual Report

Table of Contents

PART I

Item 1.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A.

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Item 7.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . .

Item 8.

Item 9.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A.

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . .

Item 11.

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

Security Ownership of Certain Beneﬁcial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13.

Certain Relationships and Related Transactions, and Director Independence . . . . . . .

Item 14.

Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

Forward-Looking Statements

Statements contained in this Form 10-K 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, words such as ‘‘believes,’’ ‘‘anticipates,’’ ‘‘estimates,’’ ‘‘plans,’’ ‘‘expects,’’ and similar expressions
are intended to identify forward-looking statements. These statements are made as of the date of this report or
as otherwise indicated, based on current expectations. We undertake no obligation to update this information.
A number of important factors could cause our actual results for 2014 and beyond to differ materially from
those expressed in any forward-looking statements made by or on our behalf. Forward-looking statements are
not guarantees of future performance as they involve a number of risks, uncertainties and assumptions that
may prove to be incorrect and that may cause our actual results and experiences to differ materially from the
anticipated results or other expectations expressed in such forward-looking statements. The risks, uncertainties
and assumptions that may affect our performance, which are described in Item 1A of this report, include our
ﬁnancial leverage and debt service requirements, dependence on key personnel, dependence on key stations,
U.S. and local economic conditions, our ability to successfully integrate acquired stations, regulatory
requirements, new technologies, natural disasters and terrorist attacks. We cannot be sure that we will be able
to anticipate or respond timely to changes in any of these factors, 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 our stock.

PART I

Item 1. Business

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast
properties. As of February 28, 2014, we owned and/or operated four television stations and four low-power
television stations serving two markets, ﬁve radio information networks, and sixty-two FM and thirty AM
radio stations serving twenty-three markets, including Bellingham, Washington; Columbus, Ohio; Norfolk,
Virginia; Milwaukee, Wisconsin; Manchester, New Hampshire; Des Moines, Iowa; and Joplin, Missouri.

The following table sets forth information about our radio stations and the markets they serve as of

February 28, 2014:

Station

FM:
WKLH
WHQG
WJMR-FM
WJMR-HD2
WNRG-FM
WSNY
WNND
WNNP
WVMX
WNOR
WAFX
KSTZ
KIOA
KAZR
KMYR
KIOA-HD2
WMGX
WMGX-HD2
WYNZ
WPOR
WCLZ
WAQY
WLZX
WRSI
WLZX-HD2
WRSY
WHAI
WPVQ
WZID
WMLL
WZID-HD2
WLRW
WIXY
WCFF
WYXY
WLRW-HD2

Market(a)

Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Columbus, OH
Columbus, OH
Columbus, OH
Columbus, OH
Norfolk, VA
Norfolk, VA
Des Moines, IA
Des Moines, IA
Des Moines, IA
Des Moines, IA
Des Moines, IA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Springﬁeld, MA
Springﬁeld, MA
Northampton, MA
Northampton, MA
Brattleboro, VT
Greenﬁeld, MA
Greenﬁeld, MA
Manchester, NH
Manchester, NH
Manchester, NH
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL

(footnotes follow tables)

2013
Market
Ranking
By Radio
Revenue(b)

2013
Market
Ranking
By Radio
Market(b)

Station Format

Target
Demographics

Men 35 − 54
Men 25 − 49

Classic Rock
Rock
Urban Adult Contemporary Women 25 − 54
Religious
Contemporary Hits
Adult Contemporary
Adult Hits
Adult Hits
Hot Adult Contemporary
Rock
Classic Rock
Hot Adult Contemporary
Classic Hits/Oldies
Rock
Adult Contemporary
Contemporary Hits
Hot Adult Contemporary
News
Classic Hits/Oldies
Country
Adult Album Alternative
Classic Rock
Rock
Adult Album Alternative
Contemporary Hits
Adult Album Alternative
Adult Contemporary
Country
Adult Contemporary
Classic Hits
Contemporary Hits
Hot Adult Contemporary
Country
Classic Hits
Classic Country
Oldies/Classic Hits

12+
Adults 18 − 34
Women 25 − 54
Adults 25 − 49
Adults 25 − 49
Women 25 − 44
Men 18 − 49
Men 35 − 54
Women 25 − 44
Adults 45 − 64
Men 18 − 34
Women 35 − 54
Adults 18 − 34
Women 25 − 44
Adults 35 − 64
Adults 45 − 64
Adults 25 − 54
Adults 25 − 54
Men 35 − 54
Men 18 − 34
Adults 35 − 54
Adults 18 − 34
Adults 35 − 54
Women 25 − 54
Adults 25 − 54
Women 25 − 54
Adults 35 − 54
Adults 18 − 34
Women 25 − 44
Adults 25 − 54
Adults 35 − 44
Adults 45 − 64
Adults 45 − 64

30
30
30
30
30
35
35
35
35
40
40
69
69
69
69
69
77
77
77
77
77
98
98
N/A
N/A
N/A
N/A
N/A
115
115
115
162
162
162
162
162

38
38
38
38
38
35
35
35
35
44
44
74
74
74
74
74
90
90
90
90
90
92
92
N/A
N/A
N/A
N/A
N/A
196
196
196
210
210
210
210
210

2013
Market
Ranking
By Radio
Revenue(b)
162
162
N/A
N/A
N/A
N/A
N/A
149
149
149
149
192
N/A
N/A
N/A
232
232
232
232
232
N/A

N/A

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Station
WIXY-HD2
WIXY-HD3
WYMG
WQQL
WDBR
WLFZ
WDBR-HD2
WOXL-FM
WTMT
WTMT-HD2
WOXL-HD2
WNAX-FM
WWWV
WQMZ
WCNR
KEGI
KDXY
KJBX
KDXY-HD2
KDXY-HD3
WCVQ

WVVR

WZZP

WEGI-FM

KISM
KAFE
KICD-FM
KLLT
KMIT
KUQL
WKVT-FM
WKNE
WSNI
WINQ
WKNE-HD2
WKNE-HD3
WQEL
WIII
WQNY
WYXL
WYXL-HD2
WYXL-HD3
WQNY-HD2
WQNY-HD3
WFIZ-FM
WFIZ-HD2

Market(a)
Champaign, IL
Champaign, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Asheville, NC
Asheville, NC
Asheville, NC
Asheville, NC
Yankton, SD
Charlottesville, VA
Charlottesville, VA
Charlottesville, VA
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Clarksville, TN —
Hopkinsville, KY
Clarksville, TN —
Hopkinsville, KY
Clarksville, TN —
Hopkinsville, KY
Clarksville, TN —
Hopkinsville, KY
Bellingham, WA
Bellingham, WA
Spencer, IA
Spencer, IA
Mitchell, SD
Mitchell, SD
Brattleboro, VT
Keene, NH
Keene, NH
Keene, NH
Keene, NH
Keene, NH
Bucyrus, OH
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY

(footnotes follow tables)

Station Format

Rock
Contemporary Hits

2013
Market
Ranking
By Radio
Market(b)
210
210
N/A Classic Rock
N/A Classic Hits/Oldies
N/A Contemporary Hits
N/A Country
N/A Variety Hits
159
159
159
159
261
N/A Rock
N/A Adult Contemporary
N/A Adult Album Alternative
Classic Hits
226
Country
226
Adult Contemporary
226
Contemporary Hits
226
Contemporary Christian
226
N/A Hot Adult Contemporary

Adult Contemporary
Rock
Sports
Adult Album Alternative
Country

N/A Country

N/A Rock

Target
Demographics

Men 18 − 49
Adults 18 − 34
Men 25 − 54
Adults 45 − 64
Adults 18 − 34
Adults 25 − 54
Adults 25 − 54
Women 25 − 54
Men 18 − 49
Men 25 − 54
Adults 18 − 49
Adults 35+
Men 25 − 54
Women 25 − 54
Adults 18 − 49
Men 25 − 54
Adults 25 − 54
Women 25 − 54
Adults 18 − 34
Adults 25 − 54
Women 25 − 54

Adults 25 − 54

Men 18 − 34

N/A Classic Hits

Adults 35 − 54

N/A Classic Rock
N/A Adult Contemporary
N/A Country
N/A Adult Contemporary
N/A Country
N/A Classic Hits/Oldies
N/A Classic Hits
N/A Hot Adult Contemporary
N/A Adult Contemporary
N/A Country
N/A Classic Rock
N/A Classic Hits/Oldies
N/A Classic Hits
N/A Classic Rock
N/A Country
N/A Adult Contemporary
N/A Adult Album Alternative
N/A Sports
N/A Progressive Talk
N/A News Talk
N/A Contemporary Hits
N/A Classic Hits/Oldies

Men 25 − 54
Women 25 − 54
Adults 35+
Women 25 − 54
Adults 35+
Adults 45 − 64
Adults 25 − 54
Women 25 − 54
Women 35 − 54
Adults 25 − 54
Men 25 − 54
Adults 45 − 64
Adults 25 − 54
Men 25 − 54
Adults 25 − 54
Women 25 − 54
Adults 35 − 54
Men 25 − 54
Adults 35+
Adults 35+
Adults 18 − 34
Adults 35+

Target
Demographics

Adults 18+
Adults 45+
Adults 45+
Adults 18+
Adults 35+
Men 25 − 54
Adults 45+
Adults 45+
Adults 35+
Adults 35+
Adults 35+
Adults 45+
Adults 35+
Men 18+
Men 18+
Adults 35+
Adults 35+
Men 18+
Adults 35 − 54

Men 18+

Adults 35+
Men 18+
Adults 35+
Adults 35+
Adults 35+
Adults 35+
Men 18+
Adults 45+
Adults 35+
Adults 35+

Station

AM:
WJYI
WJOI
KRNT
KPSZ
WGAN
WZAN
WBAE
WGIN
WHMP
WHNP
WHMQ
WFEA
WTAX
WISE
WYSE
WNAX
WINA
WVAX
WEGI

WKFN

KGMI
KPUG
KBAI
KICD
WKVT
WKBK
WZBK
WBCO
WNYY
WHCU

Market(a)

Milwaukee, WI
Norfolk, VA
Des Moines, IA
Des Moines, IA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Northampton, MA
Springﬁeld, MA
Greenﬁeld, MA
Manchester, NH
Springﬁeld, IL
Asheville, NC
Asheville, NC
Yankton, SD
Charlottesville, VA
Charlottesville, VA
Clarksville, TN —
Hopkinsville, KY
Clarksville, TN —
Hopkinsville, KY
Bellingham, WA
Bellingham, WA
Bellingham, WA
Spencer, IA
Brattleboro, VT
Keene, NH
Keene, NH
Bucyrus, OH
Ithaca, NY
Ithaca, NY

2013
Market
Ranking
By Radio
Revenue(b)

2013
Market
Ranking
By Radio
Market(b)

Station Format

30
40
69
69
77
77
77
77
N/A
98
N/A
115
N/A
149
149
192
N/A
N/A
N/A

N/A

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Christian
Adult Standards
Adult Standards/Sports
Christian
News/Talk
News/Talk/Sports
News/Talk/Sports
News/Talk/Sports

38
44
74
74
90
90
90
90
N/A News/Talk
92
News/Talk
N/A News/Talk
196
N/A News/Talk
Sports/Talk
159
Sports/Talk
159
261
News/Talk
N/A News/Talk
N/A Sports Talk
N/A Classic Hits

Adult Standards

N/A Sports/Talk

N/A News/Talk
N/A Sports/Talk
N/A Progressive Talk
N/A News/Talk
N/A News/Talk
N/A News/Talk
N/A Sports Talk
N/A Adult Standards
N/A Progressive Talk
N/A News/Talk

(a) Actual city of license may differ from metropolitan market actually served.
(b) Derived from Investing in Radio 2013 Market Report.

The following table sets forth information about the television stations that we own or operate and the

markets they serve as of February 28, 2014:

Station

KOAM-TV
KFJX(d)
KAVU-TV
KVCT(c)
KMOL-LD
KXTS-LD
KUNU-LD
KVTX-LP

Market(a)

Joplin, MO — Pittsburg, KS
Joplin, MO — Pittsburg, KS
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX

2013 Market
Ranking by
Number of TV
Households(b)

Station Affiliate

Fall 2013 Station
Ranking (by # of
viewers)(b)

150
150
203
203
203
203
203
203

CBS
FOX
ABC
FOX
NBC
CBS
Univision
Telemundo

1
3
N/S
N/S
N/S
N/S
N/S
N/S

(a) Actual city of license may differ from metropolitan market actually served.
(b) Derived from Fall 2013 A.C. Nielsen ratings and data.
(c) Station operated under the terms of a Time Brokerage Agreement (‘‘TBA’’).
(d) Station operated under the terms of a Shared Services Agreement.
N/S Station is a non-subscriber to the A.C Nielsen ratings and data.

For purposes of business segment reporting, we have aligned operations with similar characteristics into

two business segments: Radio and Television. The Radio segment includes twenty-three markets, which
includes all ninety-one of our radio stations and ﬁve radio information networks. The Television segment
includes two markets and consists of four television stations and four low power television (‘‘LPTV’’)
stations. For more information regarding our reportable segments, see Note 13 of the Notes to Consolidated
Financial Statements included with this Form 10-K, which is incorporated herein by reference.

Strategy

Our strategy is to operate top billing radio and television stations in mid-sized markets, which we deﬁne

as markets ranked from 20 to 200 out of the markets summarized by Investing in Radio Market Report and
Investing in Television Market Report.

Programming and marketing are key components in our strategy to achieve top ratings in both our radio

and television operations. In many of our markets, the three or four most highly rated stations (radio and/or
television) receive a disproportionately high share of the market’s advertising revenues. As a result, a station’s
revenue is dependent upon its ability to maximize its number of listeners/viewers within an advertiser’s given
demographic parameters. In certain cases we use attributes other than speciﬁc market listener data for sales
activities. In those markets where sufficient alternative data is available, we do not subscribe to an
independent listener rating service.

The radio stations that we own and/or operate employ a variety of programming formats, including

Classic Hits, Adult Contemporary, Classic Rock, News/Talk and Country. We regularly perform extensive
market research, including music evaluations, focus groups and strategic vulnerability studies. Our stations
also employ audience promotions to further develop and secure a loyal following.

The television stations that we own and/or operate are comprised of two CBS affiliates, one ABC
affiliate, two Fox affiliates, one Univision affiliate, one NBC affiliate, and one Telemundo affiliate. In addition
to securing network programming, we carefully select available syndicated programming to maximize
viewership. We also develop local programming, including a strong local news franchise in each of our
television markets.

We concentrate on the development of strong decentralized local management, which is responsible for
the day-to-day operations of the stations we own and/or operate. We compensate local management based on
the station’s ﬁnancial performance, as well as other performance factors that are deemed to affect the

long-term ability of the stations to achieve ﬁnancial performance objectives. Corporate management is
responsible for long-range planning, establishing policies and procedures, resource allocation and monitoring
the activities of the stations.

Under the Telecommunications Act of 1996 (the ‘‘Telecommunications Act’’), we are permitted to own as

many as 8 radio stations in a single market. See ‘‘Federal Regulation of Radio and Television Broadcasting’’.
We seek to acquire reasonably priced broadcast properties with signiﬁcant growth potential that are located in
markets with well-established and relatively stable economies. We often focus on local economies supported
by a strong presence of state or federal government or one or more major universities. Future acquisitions will
be subject to the availability of ﬁnancing, the terms of our credit facility, and compliance with the
Communications Act of 1934 (the ‘‘Communications Act’’) and Federal Communications Commission
(‘‘FCC’’) rules.

Advertising Sales

Our primary source of revenue is from the sale of advertising for broadcast on our stations. Depending

on the format of a particular radio station, there are a predetermined number of advertisements broadcast each
hour. The number of advertisements broadcast on our television stations may be limited by certain network
affiliation and syndication agreements and, with respect to children’s programs, federal regulation. We
determine the number of advertisements broadcast hourly that can maximize a station’s available revenue
dollars without jeopardizing listening/viewing levels. While there may be shifts from time to time in the
number of advertisements broadcast during a particular time of the day, the total number of advertisements
broadcast on a particular station generally does not vary signiﬁcantly from year to year. Any change in our
revenue, with the exception of those instances where stations are acquired or sold, is generally the result of
pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Advertising rates charged by radio and television stations are based primarily on a station’s ability to
attract audiences in the demographic groups targeted by advertisers, the number of stations in the market
competing for the same demographic group, the supply of and demand for radio and television advertising
time, and other qualitative factors including rates charged by competing radio and television stations within a
given market. Radio rates are generally highest during morning and afternoon drive-time hours, while
television advertising rates are generally higher during prime time evening viewing periods. Most advertising
contracts are short-term, generally running for only a few weeks. This allows broadcasters the ability to
modify advertising rates as dictated by changes in station ownership within a market, changes in
listener/viewer ratings and changes in the business climate within a particular market.

Approximately $122,400,000 or 87% of our gross revenue for the year ended December 31, 2013
(approximately $124,700,000 or 87% in ﬁscal 2012 and approximately $116,274,000 or 85% in ﬁscal 2011)
was generated from the sale of local advertising. Additional revenue is generated from the sale of national
advertising, network compensation payments, barter and other miscellaneous transactions. In all of our
markets, we attempt to maintain a local sales force that is generally larger than our competitors. The principal
goal in our sales efforts is to develop long-standing customer relationships through frequent direct contacts,
which we believe represents a competitive advantage. We also typically provide incentives to our sales staff to
seek out new opportunities resulting in the establishment of new client relationships, as well as new sources
of revenue, not directly associated with the sale of broadcast time.

Each of our stations also engages independent national sales representatives to assist us in obtaining
national advertising revenues. These representatives obtain advertising through national advertising agencies
and receive a commission from us based on our net revenue from the advertising obtained. Total gross
revenue resulting from national advertising in ﬁscal 2013 was approximately $18,904,000 or 13% of our gross
revenue (approximately $18,084,000 or 13% in ﬁscal 2012 and approximately $21,288,000 or 15% in ﬁscal
2011).

Competition

Both radio and television broadcasting are highly competitive businesses. Our stations compete for
listeners/viewers and advertising revenues directly with other radio and/or television stations, as well as other
media, within their markets. Our radio and television stations compete for listeners/viewers primarily on the

basis of program content and by employing on-air talent which appeals to a particular demographic group. By
building a strong listener/viewer base comprised of a speciﬁc demographic group in each of our markets, we
are able to attract advertisers seeking to reach these listeners/viewers.

Other media, including broadcast television and/or radio (as applicable), cable television, newspapers,

magazines, direct mail, the Internet, coupons and billboard advertising, also compete with us for advertising
revenues.

The radio and television broadcasting industries are also subject to competition from new media
technologies, such as the delivery of audio programming by cable and satellite television systems, satellite
radio systems, direct reception from satellites, and streaming of audio on the Internet.

Seasonality

Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, is

generally lowest in the ﬁrst quarter.

Environmental Compliance

As the owner, lessee or operator of various real properties and facilities, we are subject to various

federal, state and local environmental laws and regulations. Historically, compliance with these laws and
regulations has not had a material adverse effect on our business. There can be no assurance, however, that
compliance with existing or new environmental laws and regulations will not require us to make signiﬁcant
expenditures of funds.

Employees

As of December 31, 2013, we had approximately 790 full-time employees and 350 part-time employees,

none of whom are represented by unions. We believe that our relations with our employees are good.

We employ several high-proﬁle personalities with large loyal audiences in their respective markets. We
have entered into employment and non-competition agreements with our President and with most of our on-air
personalities, as well as non-competition agreements with our commissioned sales representatives.

Available Information

You can ﬁnd more information about us at our Internet website www.sagacommunications.com. Our
Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and
any amendments to those reports are available free of charge on our Internet website as soon as reasonably
practicable after we electronically ﬁle such material with, or furnish it to, the Securities and Exchange
Commission (the ‘‘SEC’’).

Federal Regulation of Radio and Television Broadcasting

Introduction. The ownership, operation and sale of radio and television stations, including those

licensed to us, are subject to the jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues, renews, revokes and modiﬁes station
licenses; determines whether to approve changes in ownership or control of station licenses; regulates
equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect
the ownership, operation and employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act. For additional information on the impact of FCC
regulations and the introduction of new technologies on our operations, see ‘‘Forward Looking Statements’’
and ‘‘Risk Factors’’ contained elsewhere herein.

The following is a brief summary of certain provisions of the Communications Act and of speciﬁc
FCC regulations and policies. Reference should be made to the Communications Act, FCC rules and the
public notices and rulings of the FCC for further information concerning the nature and extent of federal
regulation of broadcast stations.

License Renewal. Radio and television broadcasting licenses are granted for maximum terms of
eight years, and are subject to renewal upon application to the FCC. Under its ‘‘two-step’’ renewal process,

the FCC must grant a renewal application if it ﬁnds that during the preceding term the licensee has served the
public interest, convenience and necessity, and there have been no serious violations of the Communications
Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. If a renewal applicant fails
to meet these standards, the FCC may either deny its application or grant the application on such terms and
conditions as are appropriate, including renewal for less than the full 8-year term. In making the determination
of whether to renew the license, the FCC may not consider whether the public interest would be served by the
grant of a license to a person other than the renewal applicant. If the FCC, after notice and opportunity for a
hearing, ﬁnds that the licensee has failed to meet the requirements for renewal and no mitigating factors
justify the imposition of lesser sanctions, the FCC may issue an order denying the renewal application, and
only thereafter may the FCC accept applications for a construction permit specifying the broadcasting facilities
of the former licensee. Petitions may be ﬁled to deny the renewal applications of our stations, but any such
petitions must raise issues that would cause the FCC to deny a renewal application under the standards
adopted in the ‘‘two-step’’ renewal process. We have ﬁled applications to renew the Company’s radio and
television station licenses, as necessary, and we intend to timely ﬁle renewal applications, as required for the
Company’s stations. Under the Communications Act, if a broadcast station fails to transmit signals for any
consecutive 12-month period, the FCC license expires at the end of that period, unless the FCC exercises its
discretion to extend or reinstate the license ‘‘to promote equity and fairness.’’ The FCC, to date, has refused to
exercise such discretion.

The following table sets forth the market and broadcast power of each of the broadcast stations that we

own or operate with an attributable interest and the date on which each such station’s FCC license expires:

Station

FM:
WSNY
WNNP
WNND
WVMX
WQEL
WKLH
WHQG
WNRG
WJMR
WNOR
WAFX
KSTZ
KIOA
KAZR
KMYR
WMGX
WYNZ
WPOR
WCLZ
WLZX
WAQY
WZID
WMLL
WYMG
WLFZ
WDBR
WQQL
WLRW
WIXY

(footnotes follow tables)

Market(1)

Power
(Watts)(2)

Expiration Date of
FCC Authorization

Columbus, OH
Columbus, OH
Columbus, OH
Columbus, OH
Bucyrus, OH
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Norfolk, VA
Norfolk, VA
Des Moines, IA
Des Moines, IA
Des Moines, IA
Des Moines, IA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Springﬁeld, MA
Springﬁeld, MA
Manchester, NH
Manchester, NH
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Champaign, IL
Champaign, IL

50,000
6,000
6,000
6,000
3,000
50,000
50,000
6,000
6,000
50,000
100,000
100,000
100,000
100,000
100,000
50,000
25,000
50,000
50,000
6,000
50,000
50,000
6,000
50,000
50,000
50,000
25,000
50,000
25,000

October 1, 2020
October 1, 2020
October 1, 2020
October 1, 2020
October 1, 2020
December 1, 2020
December 1, 2020
December 1, 2020
December 1, 2012(6)
October 1, 2011(6)
October 1, 2019
February 1, 2021
February 1, 2021
February 1, 2021
February 1, 2021
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2006(6)
April 1, 2014(6)
April 1, 2014(6)
December 1, 2020
December 1, 2020
December 1, 2012(6)
December 1, 2020
December 1, 2020
December 1, 2020

Station

WCFF
WYXY
WNAX
KISM
KAFE
KICD
KLLT
WCVQ
WZZP
WVVR
WEGI
KMIT
KUQL
WHAI
WKNE
WRSI
WRSY
WPVQ
WKVT
WSNI
WINQ
WOXL
WTMT
KEGI
KDXY
KJBX
WWWV
WQMZ
WCNR
WYXL
WQNY
WIII

AM:
WJYI
WJOI
KRNT
KPSZ
WGAN
WZAN
WBAE
WGIN
WHNP
WHMP
WFEA
WTAX
WNAX
KGMI
KPUG
KBAI

(footnotes follow tables)

Power
(Watts)(2)

25,000
50,000
100,000
100,000
100,000
100,000
25,000
100,000
6,000
100,000
6,000
100,000
100,000
3,000
50,000
3,000
3,000
3,000
6,000
6,000
6,000
25,000
50,000
50,000
25,000
6,000
50,000
6,000
6,000
50,000
50,000
50,000

1,000
1,000
5,000
10,000
5,000
5,000
1,000
1,000
2,500(5)
1,000
5,000
1,000
5,000
5,000
10,000
1,000(5)

Expiration Date of
FCC Authorization

December 1, 2020
December 1, 2020
April 1, 2021
February 1, 2022
February 1, 2022
February 1, 2021
February 1, 2021
August 1, 2020
August 1, 2020
August 1, 2020
August 1, 2020
April 1, 2021
April 1, 2021
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
December 1, 2019
December 1, 2011(6)
June 1, 2020
June 1, 2020
June 1, 2020
October 1, 2019
October 1, 2019
October 1, 2019
June 1, 2014(6)
June 1, 2014(6)
June 1, 2014(6)

December 1, 2020
October 1, 2019
February 1, 2013(6)
February 1, 2021
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
December 1, 2012(6)
April 1, 2021
February 1, 2022
February 1, 2022
February 1, 2022

Market(1)

Champaign, IL
Champaign, IL
Yankton, SD
Bellingham, WA
Bellingham, WA
Spencer, IA
Spencer, IA
Clarksville, TN/Hopkinsville, KY
Clarksville, TN/Hopkinsville, KY
Clarksville, TN/Hopkinsville, KY
Clarksville, TN/Hopkinsville, KY
Mitchell, SD
Mitchell, SD
Greenﬁeld, MA
Keene, NH
Northampton, MA
Brattleboro, VT
Greenﬁeld, MA
Brattleboro, VT
Keene, NH
Keene, NH
Asheville, NC
Asheville, NC
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Charlottesville, VA
Charlottesville, VA
Charlottesville, VA
Ithaca, NY
Ithaca, NY
Ithaca, NY

Milwaukee, WI
Norfolk, VA
Des Moines, IA
Des Moines, IA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Springﬁeld, MA
Northampton, MA
Manchester, NH
Springﬁeld, IL
Yankton, SD
Bellingham, WA
Bellingham, WA
Bellingham, WA

Station

KICD
WEGI
WKFN
WHMQ
WKBK
WZBK
WKVT
WISE
WYSE
WBCO
WINA
WVAX
WHCU
WNYY

TV/Channel:
KOAM (DTV Ch 7)
KAVU (DTV Ch 15)
KVCT(3) (DTV Ch 11)
KUNU-LD(4) (Digital Ch 28)
KVTX-LP(4) (Operating on
Digital Ch 45 Pursuant to
Program Test Authority)
KXTS-LD(4) (Digital Ch 19)
KMOL-LD(4) (Digital Ch 17)

Market(1)

Power (Watts)(2)

Spencer, IA
Clarksville, TN/Hopkinsville, KY
Clarksville, TN
Greenﬁeld, MA
Keene, NH
Keene, NH
Brattleboro, VT
Asheville, NC
Asheville, NC
Bucyrus, OH
Charlottesville, VA
Charlottesville, VA
Ithaca, NY
Ithaca, NY

1,000
1,000(5)
1,000(5)
1,000
5,000
1,000(5)
1,000
5,000(5)
5,000(5)
5,000(5)
5,000
1,000
5,000(5)
5,000(5)

Expiration Date of
FCC Authorization

February 1, 2021
August 1, 2020
August 1, 2020
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
April 1, 2014(6)
December 1, 2019
December 1, 2019
October 1, 2020
October 1, 2019
October 1, 2019
June 1, 2014(6)
June 1, 2014(6)

Joplin, MO/Pittsburg, KS
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX

June 1, 2006(6)

DTV 14,800
DTV 900,000 August 1, 2006(6)
August 1, 2006(6)
DTV 11,350
August 1, 2006(6)
DTV 15,000
Analog 1,000 August 1, 2006(6)

Victoria, TX
Victoria, TX

DTV 15,000
DTV 15,000

August 1, 2006(6)
August 1, 2006(6)

(1) Some stations are licensed to a different community located within the market that they serve.
(2) Some stations are licensed to operate with a combination of effective radiated power (‘‘ERP’’) and

antenna height, which may be different from, but provide equivalent coverage to, the power shown. The
ERP of our television stations is expressed in terms of visual (‘‘vis’’) components. WYSE, WISE, KPSZ,
KPUG, KGMI, KBAI, WZBK, WBCO, WEGI, WKFN, WNYY and WHCU operate with lower power at
night than the power shown.

(3) We program this station pursuant to a TBA with the licensee of KVCT, Surtsey Media, LLC (‘‘Surtsey’’).

See Note 9 of the Notes to Consolidated Financial Statements included with this Form 10-K for
additional information on our relationship with Surtsey.

(4) KUNU-LD, KXTS-LD, KVTX-LP, and KMOL-LD are ‘‘low power’’ television stations that operate as

‘‘secondary’’ stations (i.e., if they conﬂict with the operations of a ‘‘full power’’ television station, the
low power stations must change their facilities or terminate operations).

(5) Operates daytime only or with greatly reduced power at night.
(6) An application for renewal of license is pending before the FCC.

Ownership Matters. The Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to
grant or renew a broadcast license, the FCC considers a number of factors pertaining to the licensee, including
compliance with the Communications Act’s limitations on alien ownership; compliance with various rules
limiting common ownership of broadcast, cable and newspaper properties; and the ‘‘character’’ and other
qualiﬁcations of the licensee and those persons holding ‘‘attributable or cognizable’’ interests therein.

Under the Communications Act, broadcast licenses may not be granted to any corporation having more

than one-ﬁfth of its issued and outstanding capital stock owned or voted by aliens (including non-U.S.
corporations), foreign governments or their representatives (collectively, ‘‘Aliens’’). The Communications Act
also prohibits a corporation, without FCC waiver, from holding a broadcast license if that corporation is
controlled, directly or indirectly, by another corporation in which more than 25% of the issued and

outstanding capital stock is owned or voted by Aliens. The FCC has issued interpretations of existing law
under which these restrictions in modiﬁed form apply to other forms of business organizations, including
partnerships. Although we serve as a holding company for most of our various radio station subsidiaries
(where we could not have more than 25% of our stock owned or voted by Aliens), we directly own two radio
stations and two FM translators so that we cannot have more than 20% of our stock owned by Aliens.

The Communications Act and FCC rules also generally prohibit or restrict the common ownership,
operation or control of a radio broadcast station and a television broadcast station serving the same geographic
market. In its 2006 Quadrennial Regulatory Review, released February 4, 2008, the FCC adopted a
presumption, in the top 20 Nielsen Designated Market Areas (‘‘DMAs’’), that it is not inconsistent with the
public interest for one entity to own a daily newspaper and a radio station or, under the following limited
circumstances, a daily newspaper and a television station, if (1) the television station is not ranked among the
top four stations in the DMA and (2) at least eight independent ‘‘major media voices’’ remain in the DMA. In
all other instances, the FCC adopted a presumption that a newspaper/broadcast station combination would not
be in the public interest, with two limited exceptions, and emphasized that the Commission is unlikely to
approve such transactions. Taking into account these respective presumptions, in determining whether the
grant of a transaction that would result in newspaper/broadcast cross-ownership is in the public interest, the
Commission will consider the following factors: (1) whether the cross-ownership will increase the amount of
local news disseminated through the affected media outlets in the combination; (2) whether each affected
media outlet in the combination will exercise its own independent news judgment; (3) the level of
concentration in the DMA; and (4) the ﬁnancial condition of the newspaper or broadcast outlet, and if the
newspaper or broadcast station is in ﬁnancial distress, the proposed owner’s commitment to invest
signiﬁcantly in newsroom operations.

The FCC established criteria for obtaining a waiver of the rules to permit the ownership of two television

stations in the same DMA that would not otherwise comply with the FCC’s rules. Under certain
circumstances, a television station may merge with a ‘‘failed’’ or ‘‘failing’’ station or an ‘‘unbuilt’’ station if
strict criteria are satisﬁed. Additionally, the FCC now permits a party to own up to two television stations (if
permitted under the modiﬁed TV duopoly rule) and up to six radio stations (if permitted under the local radio
ownership rules), or one television station and up to seven radio stations, in any market where at least 20
independently owned media voices remain in the market after the combination is effected (‘‘Qualifying
Market’’). The FCC will permit the common ownership of up to two television stations and four radio stations
in any market where at least 10 independently owned media voices remain after the combination is affected.
The FCC will permit the common ownership of up to two television stations (if permitted under the FCC’s
local television multiple ownership rule) and one radio station notwithstanding the number of voices in the
market. The FCC also adopted rules that make television time brokerage agreements or TBA’s count as if the
brokered station were owned by the brokering station in making a determination of compliance with the
FCC’s multiple ownership rules. TBA’s entered into before November 5, 1996, are grandfathered until the
FCC announces a required termination date. As a result of the FCC’s rules, we would not be permitted to
acquire a television broadcast station (other than low power television) in a non-Qualifying Market in which
we now own any television properties. The FCC revised its rules to permit a television station to affiliate with
two or more major networks of television broadcast stations under certain conditions. (Major existing
networks are still subject to the FCC’s dual network ban).

We are permitted to own an unlimited number of radio stations on a nationwide basis (subject to the
local ownership restrictions described below). We are permitted to own an unlimited number of television
stations on a nationwide basis so long as the ownership of the stations would not result in an aggregate
national audience reach (i.e., the total number of television households in the DMAs in which the relevant
stations are located divided by the total national television households as measured by DMA data at the time
of a grant, transfer or assignment of a license. For purposes of making this calculation, UHF television
stations are attributed with 50 percent of the television households in their DMA market) of 39%. The
multiple ownership rules now permit opportunities for newspaper-broadcast combinations, as follows:

(cid:129)

In markets with three or fewer TV stations, no cross-ownership is permitted among TV, radio and
newspapers. A company may obtain a waiver of that ban if it can show that the television station
does not serve the area served by the cross-owned property (i.e., the radio station or the newspaper).

(cid:129)

In markets with between 4 and 8 TV stations, combinations are limited to one of the following:

(A) A daily newspaper; one TV station; and up to half of the radio station limit for that market

(i.e., if the radio limit in the market is 6, the company can only own 3) or

(B) A daily newspaper; and up to the radio station limit for that market; (i.e., no TV stations) or

limit for that market (i.e., no daily newspapers).

(cid:129)

In markets with nine or more TV stations, the FCC eliminated the newspaper-broadcast
cross-ownership ban and the television-radio cross-ownership ban.

Under the rules, the number of radio stations one party may own in a local Nielsen Audio-rated radio
market is determined by the number of full-power commercial and noncommercial radio stations in the market
as determined by Nielsen Audio and BIA/Kelsey Radio that are not Nielsen Audio rated are determined by
analysis of the broadcast coverage contours of the radio stations involved. Numerous parties, including the
Company, have sought reconsideration of the multiple ownership rules. In Prometheus Radio v. FCC, Case
No. 03-3388 (U.S. Court of Appeals D.C. Circuit), on June 24, 2004, the court remanded the case to the
FCC for the FCC to justify or modify its approach to setting numerical limits and for the FCC to reconsider
or better explain its decision to repeal the failed station solicitation rule, and lifted a previously-imposed stay
on the effect of the revised radio multiple ownership rules. By Further Notice of Proposed Rule Making
(2006 Quadrennial Regulatory Review), released July 24, 2006, the Commission solicited comments. The rules
adopted in the 2006 Quadrennial Regulatory Review were vacated in part by the Third Circuit Court of
Appeals in Prometheus Radio Project v. FCC (652 F. 3d 432 (2011)) because the FCC’s procedures in
the rule making proceeding did not satisfy the Administrative Procedure Act. The newspaper-broadcast
cross-ownership rule was vacated, but the media ownership rules were affirmed. The FCC had created special
beneﬁts for so-called ‘‘eligible entities.’’ Because there was no data attempting to show a connection between
the FCC’s eligible entity deﬁnition and the goal of increasing ownership of minorities and women under
§309(j) of the Telecommunication Act of 1996, the ‘‘eligible entity’’ deﬁnition adopted was vacated as
arbitrary and capricious. In its 2010 Quadrennial Regulatory Review, released December 22, 2011, the
Commission proposed to eliminate the radio/television cross-ownership rule in favor of reliance on the local
radio rule and local television rule. Other rules were left largely unchanged:

(cid:129)

Local Television Ownership Rule. The FCC tentatively concluded that it should retain the current
local television ownership rule with minor modiﬁcations (eliminate the Grade B contour overlap
provision of the current rule). The FCC tentatively concluded that it should retain the prohibition
against mergers among the top-four-rated stations, the eight-voices test, and the existing numerical
limits. In addition, the FCC sought comment on whether to adopt a waiver standard applicable to
small markets, as well as appropriate criteria for any such standard. The FCC sought comment on
whether multicasting should be a factor in determining the television ownership limits.

Local Radio Ownership Rule. The FCC proposed to retain the current local radio ownership rule;
however, the FCC is seeking comment on modiﬁcations to the rule and whether and how the rule
should account for other audio platforms. The FCC proposed to also retain the AM/FM subcaps
(limitations on how many AM and FM stations may be owned in a market), and sought comment on
the impact of the introduction of digital radio. The FCC also sought comment on whether to adopt a
waiver standard and on speciﬁc criteria to adopt.

Newspaper/Broadcast Cross-Ownership Rule. The FCC tentatively concluded that some
newspaper/broadcast cross-ownership restrictions continue to be necessary to protect and promote
viewpoint diversity, and proposed to use DMA deﬁnitions to determine that relevant market area for
television stations. The FCC proposed to adopt a rule that includes elements of the 2006 rule,
including the top 20 DMA demarcation point, the top-four television station restrictions, and the
eight remaining voices test.

(cid:129)

Dual Network Rule. The FCC tentatively concluded that the dual network rule remains necessary
in the public interest to promote competition and localism and should be retained without
modiﬁcation.

The FCC also sought comment on whether television local news service (‘‘LNS’’) agreements and shared

service agreements (‘‘SSA’’) are substantively equivalent to agreements that are already subject to the FCC’s
attribution rules, and are therefore attributable now or should be in the future.

New rules could restrict the Company’s ability to acquire additional radio and television stations in some

markets and could require the Company to terminate its arrangements with Surtsey. The Court and FCC
proceedings are ongoing and we cannot predict what action, if any, the Court or the FCC may take to further
modify its rules. The statements herein are based solely on the FCC’s multiple ownership rules in effect as of
the date hereof and do not include any forward-looking statements concerning compliance with any future
multiple ownership rules.

Under the Communications Act, we are permitted to own radio stations (without regard to the audience

shares of the stations) based upon the number of full-power radio stations in the relevant radio market as
follows:

Number of
Stations In Radio
Market

14 or Fewer

15 − 29
30 − 44
45 or More

Number of Stations We Can Own

Total of 5 stations, not more than 3 in the same service (AM or FM), except the Company
cannot own more than 50% of the stations in the market.
Total of 6 stations, not more than 4 in the same service (AM or FM).
Total of 7 stations, not more than 4 in the same service (AM or FM).
Total of 8 stations, not more than 5 in the same service (AM or FM).

New rules to be promulgated under the Communications Act may permit us to own, operate, control or
have a cognizable interest in additional radio broadcast stations if the FCC determines that such ownership,
operation, control or cognizable interest will result in an increase in the number of radio stations in operation.
No ﬁrm date has been established for initiation of this rule-making proceeding.

The FCC generally applies its ownership limits to ‘‘attributable’’ interests held by an individual,

corporation, partnership or other association. In the case of corporations holding broadcast licenses, the
interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the
corporation’s stock (or 20% or more of such stock in the case of certain passive investors that are holding
stock for investment purposes only) are generally attributable, as are positions of an officer or director of a
corporate parent of a broadcast licensee. Currently, none of our directors has an attributable interest or
interests in companies applying for or licensed to operate broadcast stations other than us.

The FCC’s ownership attribution rules (a) apply to limited liability companies and registered limited
liability partnerships the same attribution rules that the FCC applies to limited partnerships; and (b) include an
equity/debt plus (‘‘EDP’’) rule that attributes the other media interests of an otherwise passive investor if the
investor is (1) a ‘‘major-market program supplier’’ that supplies over 15% of a station’s total weekly broadcast
programming hours, or (2) a same-market media entity subject to the FCC’s multiple ownership rules
(including broadcasters, cable operators and newspapers) so that its interest in a licensee or other media entity
in that market will be attributed if that interest, aggregating both debt and equity holdings, exceeds 33% of the
total asset value (equity plus debt) of the licensee or media entity. We could be prohibited from acquiring a
ﬁnancial interest in stations in markets where application of the EDP rule would result in us having an
attributable interest in the stations. In reconsidering its rules, the FCC also eliminated the ‘‘single majority
shareholder exemption’’ which provides that minority voting shares in a corporation where one shareholder
controls a majority of the voting stock are not attributable; however, in December 2001 the FCC ‘‘suspended’’
the elimination of this exemption until the FCC resolved issues concerning cable television ownership.

On January 21, 2010, the FCC launched an initiative on the future of media and the information needs of

communities in the digital age, which will examine the changes underway in the media marketplace, analyze
the full range of future technologies and services that will provide communities with news and information in

the digital age, and, as appropriate, make policy recommendations to the FCC, other government entities, and
other parties. Initial topics under consideration include: the state of TV, radio, newspaper, and Internet news
and information services; the effectiveness and nature of public interest obligations in a digital era; the role of
public media and private sector foundations; and many others. Proposals are before the FCC whereby the
government would take back part of the spectrum allotted for over-the-air television in favor of wireless
broadband. The FCC is conducting a proceeding whereby broadcasters may voluntarily participate in an
auction of their over-the-air broadcast spectrum, otherwise agree to modiﬁcations in the spectrum available to
them, move from the UHF to the VHF band (with or without compensations), or become subject to
restrictions on their usage of the spectrum. The Company cannot predict what changes, if any, will be made as
a result of the FCC’s initiative.

In addition to the FCC’s multiple ownership rules, the Antitrust Division of the United States Department

of Justice and the Federal Trade Commission and some state governments have the authority to examine
proposed transactions for compliance with antitrust statutes and guidelines. The Antitrust Division has issued
‘‘civil investigative demands’’ and obtained consent decrees requiring the divestiture of stations in a particular
market based on antitrust concerns.

Programming and Operation. The Communications Act requires broadcasters to serve the ‘‘public
interest.’’ Licensees are required to present programming that is responsive to community problems, needs and
interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners
concerning a station’s programming often will be considered by the FCC when it evaluates renewal
applications of a licensee, although such complaints may be ﬁled at any time and generally may be considered
by the FCC at any time. Stations also must follow various rules promulgated under the Communications Act
that regulate, among other things, political advertising, sponsorship identiﬁcation, the advertisement of contests
and lotteries, obscene and indecent broadcasts, and technical operations, including limits on radio frequency
radiation. The FCC now requires the owners of antenna supporting structures (towers) to register them with
the FCC. As an owner of such towers, we are subject to the registration requirements. The Children’s
Television Act of 1990 and the FCC’s rules promulgated thereunder require television broadcasters to limit the
amount of commercial matter which may be aired in children’s programming to 10.5 minutes per hour on
weekends and 12 minutes per hour on weekdays. The Children’s Television Act and the FCC’s rules also
require each television licensee to serve, over the term of its license, the educational and informational needs
of children through the licensee’s programming (and to present at least three hours per week of ‘‘core’’
educational programming speciﬁcally designed to serve such needs). Licensees are required to publicize the
availability of this programming and to ﬁle quarterly a report with the FCC on these programs and related
matters. On April, 27, 2012, the FCC released a Second Report and Order that requires television stations to
post their public ﬁles online in a central, Commission-hosted database, rather than maintaining the ﬁles locally
at their main studios. It did not impose any new reporting obligation on the Company. The FCC did not adopt
new disclosure obligations for sponsorship identiﬁcation and shared services agreements as had been
proposed. The FCC deferred considering whether to adopt online posting of public ﬁles for radio stations until
the FCC has gained experience with online posting ﬁles of television broadcasters. Television stations are
required to provide closed captioning for certain video programming.

Equal Employment Opportunity Rules. Equal employment opportunity (EEO) rules and policies for

broadcasters prohibit discrimination by broadcasters and multichannel video programming distributors
(‘‘MVPDs’’). They also require broadcasters to provide notice of job vacancies and to undertake additional
outreach measures, such as job fairs and scholarship programs. The rules mandate a ‘‘three prong’’ outreach
program; i.e., Prong 1: widely disseminate information concerning each full-time (30 hours or more) job
vacancy, except for vacancies ﬁlled in exigent circumstances; Prong 2: provide notice of each full-time job
vacancy to recruitment organizations that have requested such notice; and Prong 3: complete two (for
broadcast employment units with ﬁve to ten full-time employees or that are located in smaller markets) or
four (for employment units with more than ten full-time employees located in larger markets) longer-term
recruitment initiatives within a two-year period. These include, for example, job fairs, scholarship and
internship programs, and other community events designed to inform the public as to employment
opportunities in broadcasting. The rules mandate extensive record keeping and reporting requirements. The
EEO rules are enforced through review at renewal time, at mid-term for larger broadcasters, and through

random audits and targeted investigations resulting from information received as to possible violations. The
FCC has not yet decided on whether and how to apply the EEO rule to part-time positions. Failure to observe
these or other rules and policies can result in the imposition of various sanctions, including monetary
forfeitures, the grant of ‘‘short’’ (less than the full eight-year) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a license.

Time Brokerage Agreements. As is common in the industry, we have entered into what have commonly

been referred to as Time Brokerage Agreements (‘‘TBAs’’). Such arrangements are an extension of the
concept of agreements under which a licensee of a station sells blocks of time on its station to an entity or
entities which purchase the blocks of time and which sell their own commercial advertising announcements
during the time periods in question. While these agreements may take varying forms, under a typical TBA,
separately owned and licensed radio or television stations agree to enter into cooperative arrangements of
varying sorts, subject to compliance with the requirements of antitrust laws and with the FCC’s rules and
policies. Under these types of arrangements, separately-owned stations agree to function cooperatively in
terms of programming, advertising sales, and other matters, subject to the licensee of each station maintaining
independent control over the programming and station operations of its own station. One typical type of TBA
is a programming agreement between two separately-owned radio or television stations serving a common
service area, whereby the licensee of one station purchases substantial portions of the broadcast day on the
other licensee’s station, subject to ultimate editorial and other controls being exercised by the latter licensee,
and sells advertising time during such program segments.

The FCC’s rules provide that a station purchasing (brokering) time on another station serving the same
market will be considered to have an attributable ownership interest in the brokered station for purposes of the
FCC’s multiple ownership rules. As a result, under the rules, a broadcast station will not be permitted to enter
into a time brokerage agreement giving it the right to purchase more than 15% of the broadcast time, on a
weekly basis, of another local station that it could not own under the local ownership rules of the FCC’s
multiple ownership rules. The FCC’s rules also prohibit a broadcast licensee from simulcasting more than
25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) whether it
owns the stations or through a TBA arrangement, where the brokered and brokering stations serve
substantially the same geographic area.

The FCC’s multiple ownership rules count stations brokered under a joint sales agreement (‘‘JSA’’)
toward the brokering station’s permissible ownership totals, as long as (1) the brokering entity owns or has an
attributable interest in one or more stations in the local market, and (2) the joint advertising sales amount to
more than 15% of the brokered station’s advertising time per week. In a ‘‘Notice of Proposed Rulemaking’’ in
MB Docket No. 04-256, released August 2, 2004, the FCC sought comment from the public on whether
television JSAs should also be attributable to the brokering station. The issue of whether to make attributable
Shared Services Agreements and Local News Service Agreements is among the subjects being considered in
the 2010 Quadrennial Regulatory Review. We cannot predict whether the FCC will make such agreements
attributable. The FCC rules permit, under certain circumstances, the ownership of two or more television
stations in a Qualifying Market and require the termination of certain non-complying existing television
TBA’s. We currently have a television TBA in the Victoria, Texas market with Surtsey. Even though the
Victoria market is not a Qualifying Market such that the duopoly would otherwise be permissible, as
discussed above, we believe that the TBA is ‘‘grandfathered’’ under the FCC’s rules and need not be
terminated earlier than the date to be established in the ownership review proceeding. See ‘‘Ownership
Matters’’ above.

On March 7, 2003 we entered into an agreement of understanding with Surtsey, whereby we have
guaranteed up to $1,250,000 of the debt incurred by Surtsey in closing on the acquisition of a construction
permit for KFJX-TV, a television station in Pittsburg, Kansas, serving the Joplin, Missouri television market.
In consideration for our guarantee, Surtsey has entered into various agreements with us relating to the station,
including a Shared Services Agreement, Agreement for Use of Ancillary Digital Spectrum and Agreement for
the Sale of Commercial Time. On January 31, 2012, the Company and Surtsey amended these agreements and
entered into an agreement which included an assignable option with Surtsey for KFJX-TV. Under the FCC’s
ownership rules, we are prohibited from owning or having an attributable or cognizable interest in KFJX-TV.
On January 31, 2012, we entered into an agreement which included an extension of the grandfathered TBA

for KVCT-TV and an assignable option with Surtsey for KVCT-TV. As noted above, if the FCC decides to
attribute television SSA’s and JSA’s, we would be required to terminate the Agreement for the Sale of
Commercial Time.

Other FCC Requirements

The ‘‘V-Chip.’’ The FCC adopted rules requiring every television receiver, 13 inches or larger, sold in

the United States since January 2000 to contain a ‘‘V-chip’’ which allows parents to block programs on a
standardized rating system. The FCC also adopted the TV Parental Guidelines, developed by the Industry
Ratings Implementation Group, which apply to all broadcast television programming except for news and
sports. As a part of the legislation, television station licensees are required to attach as an exhibit to their
applications for license renewal a summary of written comments and suggestions received from the public and
maintained by the licensee that comment on the licensee’s programming characterized as violent.

Digital Television. Under the FCC’s rules all U.S. television broadcasters have been required to convert

their operations from NTSC (analog) to digital television (‘‘DTV’’). DTV licensees may use their DTV
channels for a multiplicity of services such as high-deﬁnition television broadcasts, multiple standard
deﬁnition television broadcasts, data, audio, and other services so long as the licensee provides at least one
free video channel equal in quality to the previous NTSC technical standard. Our full-service television
stations currently provide DTV service and have terminated NTSC operations. The Company has constructed
DTV facilities serving at least 80% of their NTSC population coverage. We hold licenses that authorize
KOAM-TV to operate on Channel 7 for DTV and KAVU-TV to operate on Channel 15 for DTV. The FCC’s
rules require broadcasters to include Program and System Information Protocol (‘‘PSIP’’) information in their
digital broadcast signals.

Brokered Station KVCT is providing DTV service on Channel 11. KFJX-TV, with which KOAM-TV

shares certain services, is providing DTV services on Channel 13.

In October 2003, the FCC adopted rules requiring ‘‘plug and play’’ cable compatibility which would

allow consumers to plug their cable directly into their digital TV set without the need for a set-top box. In
January 2013, the U.S. Court of Appeals for the D.C. Circuit vacated the rules. The Company cannot predict
whether the FCC will adopt other proposals to address this matter. The FCC has adopted rules whereby
television licensees are charged a fee of 5% of gross revenue derived from the offering of ancillary or
supplementary services on DTV spectrum for which a subscription fee is charged. Licensees and ‘‘permittees’’
of DTV stations must ﬁle with the FCC a report by December 1 of each year describing such services. None
of the Company’s stations to date are offering ancillary or supplementary services on their DTV channels.

White Spaces. On September 23, 2010, the FCC adopted a Second Memorandum Opinion and Order in

ET Docket No. 04-186 that updated the rules for unlicensed wireless devices that can operate in broadcast
television spectrum at locations where that spectrum is unused by licensed services. This unused TV spectrum
is commonly referred to as television ‘‘white spaces.’’ The rules allow for the use of unlicensed TV bands
devices in the unused spectrum to provide broadband data and other services for consumers and businesses. It
is possible that such operations have the potential for causing interference to broadcast operation, but we
cannot yet judge whether such operations will have an adverse impact on the Company’s operations.

‘‘Must-Carry’’ Rules. The Cable Television Consumer Protection and Competition Act of 1992, among

other matters, requires cable television system operators to carry the signals of local commercial and
non-commercial television stations and certain low power television stations. Cable television operators and
other MVPDs may not carry broadcast signals without, in certain circumstances, obtaining the transmitting
station’s consent. A local television broadcaster must make a choice every three years whether to proceed
under the ‘‘must-carry’’ rules or waive the right to mandatory-uncompensated coverage and negotiate a grant
of retransmission consent in exchange for consideration from the MVPD. Such must-carry rights extend to the
DTV signals broadcast by our stations. For the three-year period commencing on January 1, 2012, we
generally elected ‘‘retransmission consent’’ in notifying MVPDs that carry our television programming in our
television markets.

Low Power and Class A Television Stations. Currently, the service areas of low power television
(‘‘LPTV’’) stations are not protected. LPTV stations can be required to terminate their operations if they cause
interference to full power stations. LPTV stations meeting certain criteria were permitted to certify to the FCC
their eligibility to be reclassiﬁed as ‘‘Class A Television Stations’’ whose signal contours would be protected
against interference from other stations. Stations deemed ‘‘Class A Stations’’ by the FCC would thus be
protected from interference. We own four operating LPTV stations, KUNU-LD, KVTX-LP, KXTS-LD, and
KMOL-LD, Victoria, Texas, all of which operate in the digital mode. None of the stations qualiﬁes under the
FCC’s established criteria for Class A status. In January 2006, the FCC announced a ﬁling window from
May 1 through May 12, 2006, during which NTSC LPTV stations could apply for a digital companion
channel or implement DTV operation on their existing NTSC channels. The Company’s LPTV stations did not
apply for companion channels, and instead ﬁled applications to ‘‘ﬂash-cut’’ to implement DTV operation on
their existing NTSC channels, or ﬁled ‘‘displacement’’ applications to use different digital channels. The FCC
has set September 1, 2015, as the terminal date for transition of LPTV to digital transmission.

Low Power FM Radio. The FCC has created a ‘‘low power radio service’’ on the FM band (‘‘LPFM’’)

in which the FCC authorizes the construction and operation of noncommercial educational FM stations with
up to 100 watts effective radiated power (‘‘ERP’’) with antenna height above average terrain (‘‘HAAT’’) at up
to 30 meters (100 feet). This combination is calculated to produce a service area radius of approximately
3.5 miles. The FCC’s rules will not permit any broadcaster or other media entity subject to the FCC’s
ownership rules to control or hold an attributable interest in an LPFM station or enter into related operating
agreements with an LPFM licensee. Thus, absent a waiver, we could not own or program an LPFM station.
LPFM stations are allocated throughout the FM broadcast band, (i.e., 88.1 to 107.9 MHz), although they must
operate with a noncommercial format. The FCC has established allocation rules that require FM stations to be
separated by speciﬁed distances to other stations on the same frequency, and stations on frequencies on the
ﬁrst, second and third channels adjacent to the center frequency. The FCC has granted construction permits
and licenses for LPFM stations. On January 4, 2011, the President signed into law the Local Community
Radio Act of 2010 which requires the Commission to modify the rules authorizing the operation of LPFM, as
proposed in MM Docket No. 99-25. The law requires the Commission to: (1) Prescribe protection for
co-channels and ﬁrst- and second-adjacent channels; (2) Prohibit any applicant from obtaining a LPFM license
if the applicant has engaged in any manner in the unlicensed operation of any station in violation of the
Communications Act; (3) Eliminate provisions prohibiting the FCC from extending the eligibility for
application for LPFM stations beyond the organizations and entities as proposed in the docket; and
(4) Eliminate third-adjacent minimum distance separation requirements between: (i) LPFM stations and
(ii) full-service FM stations, FM translator stations, and FM booster stations. The law prohibits the FCC from
reducing the minimum co-channel and ﬁrst- and second-adjacent channel distance separation requirements in
effect on the date of enactment of the law between LPFM stations and full-service FM stations. The law
authorizes a waiver of the second-adjacent channel distance separation requirement to any LPFM station that
establishes that its proposed operations will not interfere with any authorized radio service, provided that,
upon notiﬁcation by the FCC that it is causing certain interference, such LPFM station must: (i) suspend
operation; and (ii) resume operation only after interference has been eliminated or it demonstrates that such
interference was not due to the LPFM station’s emissions. The law requires the FCC to comply with its
existing minimum distance separation requirements for full-service FM stations, FM translator stations, and
FM booster stations that broadcast radio reading services via an analog subcarrier frequency to avoid potential
interference by LPFM stations; and when licensing new FM translator stations, FM booster stations, and
LPFM stations, to ensure that: (i) licenses are available to FM translator stations, FM booster stations, and
LPFM stations; (ii) such decisions are made based on the needs of the local community; and (iii) FM
translator stations, FM booster stations, and LPFM stations remain equal in status and secondary to existing
and modiﬁed full-service FM stations.

On January 5, 2012, the FCC released a Report to Congress on the impact that LPFM stations will have
on full-service commercial FM stations. The FCC ‘‘found no statistically reliable evidence that low-power FM
stations have a substantial or consistent economic impact on full-service commercial FM stations,’’ and that
‘‘low-power FM stations generally do not have, and in the future are unlikely to have, a demonstrable
economic impact on full-service commercial FM radio stations.’’ In an order released December 4, 2012, the
FCC modiﬁed its rules to implement the new law. The FCC has dismissed approximately 3,000 so-called

‘‘short-form’’ applications for construction permits for new FM translator stations to accommodate a ﬁling
opportunity for construction permits for new LPFM stations. Two of the Company’s short-form applications
have been dismissed pursuant to this process. The FCC opened a ‘‘ﬁling window’’ from October 17 through
November 14, 2013, during which it received over 2,800 applications for new stations and major
modiﬁcations of authorized LPFM stations. Some of these applications have been granted, including
applications for LPFM stations in markets where the Company operates radio stations. Applications that are
‘‘mutually-exclusive’’ with other LPFM applications ﬁled in the window are the subject of the FCC’s ongoing
procedures to resolve the mutually exclusive situations. In December 2013, the FCC opened a 60-day
‘‘window’’ to permit mutually-exclusive LPFM applicants to attempt to resolve the mutually-exclusive
conditions. We cannot predict what, if any, impact the new LPFM stations will have on the Company’s
full-service stations and FM translators.

Digital Audio Radio Satellite Service and Internet Radio.

In adopting its rules for the Digital Audio

Radio Satellite Service (‘‘DARS’’) in the 2310-2360 MHz frequency band, the FCC stated, ‘‘although healthy
satellite DARS systems are likely to have some adverse impact on terrestrial radio audience size, revenues and
proﬁts, the record does not demonstrate that licensing satellite DARS would have such a strong adverse
impact that it threatens the provision of local service.’’ The FCC granted two nationwide licenses, one to XM
Satellite Radio, which began broadcasting in May 2001, and a second to Sirius Satellite Radio, which began
broadcasting in February 2002. The satellite radio systems provide multiple channels of audio programming in
exchange for the payment of a subscription fee. The FCC approved the application of Sirius Satellite Radio
Inc. and XM Satellite Radio Holdings Inc. to transfer control of the licenses and authorizations held by the
two companies to one company, which is now known as Sirius XM Radio, Inc. We cannot predict the extent
to which DARS will have an adverse impact on our business. Various companies have introduced devices that
permit the reception of audio programming streamed over the Internet on home computers, on portable
receivers, such as cell phones, and in automobiles. A number of digital music providers have developed and
are offering their product through the Internet. Terrestrial radio operators (including the Company) are also
making their product available through the Internet. We cannot predict whether, or the extent to which, such
competing reception devices will have an adverse impact on our business.

Satellite Carriage of Local TV Stations and ‘‘Aereo’’ Technology. The Satellite Home Viewer
Improvement Act (‘‘SHVIA’’), a copyright law, prevents direct-to-home satellite television carriers from
retransmitting broadcast network television signals to consumers unless those consumers (1) are ‘‘unserved’’
by the over-the-air signals of their local network affiliate stations, and (2) have not received cable service in
the preceding 90 days. According to the SHVIA, ‘‘unserved’’ means that a consumer cannot receive, using a
conventional outdoor rooftop antenna, a television signal that is strong enough to provide an adequate
television picture. In December 2001 the U.S. Court of Appeals for the District of Columbia upheld the FCC’s
rules for satellite carriage of local television stations which require satellite carriers to carry upon request all
local TV broadcast stations in local markets in which the satellite carriers carry at least one TV broadcast
station, also known as the ‘‘carry one, carry all’’ rule. In December 2004, Congress passed and the President
signed the Satellite Home Viewer Extension and Reauthorization Act of 2004 (‘‘SHVERA’’), which again
amends the copyright laws and the Communications Act. The SHVIA governs the manner in which satellite
carriers offer local broadcast programming to subscribers, but the SHVIA copyright license for satellite
carriers was more limited than the statutory copyright license for cable operators. Speciﬁcally, for satellite
purposes, ‘‘local,’’ though out-of-market (i.e., ‘‘signiﬁcantly viewed’’) signals were treated the same as truly
‘‘distant’’ (e.g., hundreds of miles away) signals for purposes of the SHVIA’s statutory copyright licenses.
The SHVERA is intended to address this inconsistency by giving satellite carriers the option to offer
Commission-determined ‘‘signiﬁcantly viewed’’ signals to subscribers. In November, 2005, the FCC adopted a
Report and Order to implement SHVERA to enable satellite carriers to offer FCC-determined ‘‘signiﬁcantly
viewed’’ signals of out-of-market broadcast stations to subscribers subject to certain constraints set forth in
SHVERA. The Order includes an updated list of stations currently deemed signiﬁcantly viewed. On
November 23, 2010, the FCC released three orders that implemented the Satellite Television Extension and
Localism Act of 2010 (‘‘STELA’’). The FCC modiﬁed its Signiﬁcantly Viewed (‘‘SV’’) rules to implement
Section 203 of the STELA which amends Section 340 of the Communications Act to give satellite carriers the
authority to offer out-of-market but SV broadcast television stations as part of their local service to
subscribers. Section 203 of the STELA changes the restrictions on subscriber eligibility to receive SV network

stations from satellite carriers. To implement the STELA, the FCC revised its satellite subscriber eligibility
rules. The new rules could result in satellite carriers providing additional signals in DMAs where the
Company operates television stations, but we cannot predict at this time, what, if any, impact the rules might
have on the Company. A technology company, Aereo, Inc., in 2012 launched a service that allows subscribers
to view live as well as time-shifted streams of over-the-air television programs on Internet-connected devices.
On April 1, 2013, a federal appeals court upheld a lower court’s ruling, ﬁnding that Aereo, Inc.’s streams to
subscribers were not ‘‘public performances’’, and thus did not constitute copyright infringement. The matter is
subject to ongoing litigation. We cannot predict whether this technology will have an impact on the Company.

In-Band On-Channel ‘‘Hybrid Digital’’ Radio. The FCC has adopted rules permitting radio stations to

broadcast using in-band, on-channel (IBOC) as the technology that allows AM and FM stations to operate
using the IBOC systems developed by iBiquity Digital Corporation. This technology has become commonly
known as ‘‘hybrid digital’’ or HD radio. Stations broadcast the same main channel program material in both
analog and digital modes. HD radio technology permits ‘‘hybrid’’ operations, the simultaneous transmission of
analog and digital signals with a single AM and FM channel. HD radio technology can provide near
CD-quality sound on FM channels and FM quality on AM channels. HD radio technology also permits the
transmission of up to three additional program streams over the radio stations. At the present time, we are
conﬁgured to broadcast in HD radio on 51 stations and we continue to convert stations to HD radio on an
ongoing basis.

Use of FM Translators by AM Stations and Digital Program Streams. FM translator stations are
relatively low power radio stations (maximum ERP: 250 Watts) that rebroadcast the programs of full-power
FM stations on a secondary basis, meaning they must terminate or modify their operation if they cause
interference to a full-power station. The FCC permits AM stations to be rebroadcast on FM translator stations
in order to improve reception of programs broadcast by AM stations. The Company intends to continue to use
some of its existing FM translators in connection with some of its AM stations. In a Notice of Proposed
Rulemaking, released October 31, 2013, the Commission tentatively concluded that it should afford an
opportunity, restricted to AM licensees and permittees, to apply for and receive authorizations for new FM
translator stations for the sole and limited purpose of enhancing their existing service to the public. It,
therefore, proposed to open a one-time ﬁling window during which only AM broadcasters may participate. In
the ﬁling window, qualifying AM licensees may apply for one, and only one, new FM translator station, in the
non-reserved FM band to be used solely to re-broadcast the AM licensee’s AM signal to provide ﬁll-in and/or
nighttime service. The Company is an AM licensee and expects to participate in the ﬁling opportunity. The
Company is using some of its existing FM translators to rebroadcast HD radio program streams generated by
some of its FM stations, which is permitted by the FCC.

Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Federal Trade Commission and the

Department of Justice, the federal agencies responsible for enforcing the federal antitrust laws, may investigate
certain acquisitions. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, an acquisition meeting
certain size thresholds requires the parties to ﬁle Notiﬁcation and Report Forms with the Federal Trade
Commission and the Department of Justice and to observe speciﬁed waiting period requirements before
consummating the acquisition. Any decision by the Federal Trade Commission or the Department of Justice to
challenge a proposed acquisition could affect our ability to consummate the acquisition or to consummate it
on the proposed terms. The FCC has eliminated its previous scrutiny of some proposed acquisitions and
mergers on antitrust grounds that were manifest in a policy of placing a ‘‘ﬂag’’ soliciting public comment on
concentration of control issues based on advertising revenue shares or other criteria, on the public notice
announcing the acceptance of assignment and transfer applications. Notwithstanding this action, we cannot
predict whether the FCC will adopt rules that would restrict our ability to acquire additional stations.

Changes to Application and Assignment Procedures.

In January 2010, the FCC adopted a First Report
and Order that gives Native American tribes a priority to obtain broadcast radio licenses in tribal communities.
The Order provides an opportunity for tribes to establish new service speciﬁcally designed to offer
programming that meets the needs of tribal citizens. In addition, the First Report and Order modiﬁed the
Commission’s radio application and assignment procedures, assisting qualiﬁed applicants to more rapidly
introduce new radio service to the public. These modiﬁcations (1) Prohibit an AM applicant that obtains a
construction permit through a dispositive Section 307(b) preference from downgrading the service level that

led to the dispositive preference; (2) Requires technical proposals for new or major change AM facilities ﬁled
with Form 175 (i.e., FCC ‘‘short-form’’ Auction) applications to meet certain minimum technical standards to
be eligible for further auction processing; and (3) Gives FCC operating bureaus authority to cap ﬁling window
applications. On December 29, 2011, the FCC released its Third Report and Order which limits eligibility for
authorizations associated with allotments added to the FM Table of Allotments using the ‘‘Tribal Priority’’ to
the tribes whom the Tribal Priority was intended to beneﬁt. In a Public Notice released December 2, 2010
(GN Docket No. 10-244) the FCC sought comment on how it could design, adopt, and implement an
additional new preference program in its competitive bidding process for persons or entities that have
overcome substantial disadvantage and would be eligible for a bidding credit. In the Quadrennial Regulatory
Review NPRM, the Commission also sought comment on a proposal for applicants to be accorded licensing
preferences if they could demonstrate that they have overcome ‘‘signiﬁcant social and economic
disadvantages.’’ The Company cannot predict whether such preferences will be adopted, or whether they
would have any impact on the Company.

Spectrum Auctions and Channel Sharing. On November 30, 2010, the FCC adopted a Notice of
Proposed Rulemaking in ET Docket No. 10-235 that proposed that wireless broadband providers have equal
access to television broadcast frequencies that could become available in spectrum auctions. On April 27,
2012, the adopted new rules in that docket that establish a framework for how two or more television
licensees may voluntarily share a single six MHz channel in conjunction with the auction process:

(cid:129) While stations will need to retain at least one standard deﬁnition programming stream to meet the

FCC’s requirement of providing an over-the-air video broadcast at no direct charge to viewers, they
will have the ﬂexibility of tailoring their channel sharing agreements to meet their individual
programming and economic needs.

(cid:129)

Stations sharing together will employ a single channel and transmission facility but will each
continue to be licensed separately, retain its original call sign, retain all the rights pertaining to an
FCC license, and remain subject to all of the FCC’s rules, policies, and obligations.

The new rules apply to full power and Class A television stations, including both commercial and
noncommercial educational television stations. The rules neither increase nor decrease the cable and satellite
carriage rights currently afforded broadcast licensees. Nor do the new rules address the proposals in the Notice
of Proposed Rulemaking to establish ﬁxed and mobile allocations in the UHF/VHF bands or to improve TV
service on VHF channels. The FCC said it will address the allocation issue in a future rulemaking, and may
address the VHF issues at a later date as well. At this time, the Company has made no decision as to whether
it will voluntarily participate in combining operations or spectrum auctions.

Proposed Changes. The FCC has under consideration, and may in the future consider and adopt, new
laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect us
and the operation and ownership of our broadcast properties. Application processing rules adopted by the FCC
might require us to apply for facilities modiﬁcations to our standard broadcast stations in future ‘‘window’’
periods for ﬁling applications or result in the stations being ‘‘locked in’’ with their present facilities. The FCC
is authorized to use auctions for the allocation of radio broadcast spectrum frequencies for commercial use.
The implementation of this law could require us to bid for the use of certain frequencies.

The Company pays for the use of music broadcast on its stations by obtaining licenses from
organizations called performing rights societies, e.g. Broadcast Music, Inc. (‘‘BMI’’), which, in turn pay
composers, authors and publishers for their works. Federal law grants a performance right for sound
recordings in favor of recording companies and performing artists for non-interactive digital transmissions and
Internet radio. As a result, users of music, including the Company, are required to pay royalties for these uses
through Sound Exchange, a non-proﬁt performance rights organization. In 2009, a bill, H.R. 848, the
Performance Rights Act, was introduced in Congress, but did not pass in the 111th Congress. If passed, this
bill would have required the Company to pay additional fees to an organization called MusicFirst which
would distribute the money to other entities. Efforts continue by MusicFirst to persuade Congress to enact a
law that would require such payments. We cannot predict whether such a law might be enacted. Should such a
law be enacted, it would impose an additional ﬁnancial burden on the Company, but the extent of the burden
would depend on how the fee payment requirement was structured.

On January 3, 2013, the FCC released the Sixth Further Notice of Proposed Rulemaking, which seeks
comment on the requirement that persons with attributable interests in broadcast licensees and other entities
ﬁling an FCC Ownership Report provide an ‘‘FCC Registration Number’’ (‘‘FRN’’) linked to their social
security numbers. Questions have been raised about the security of the FCC’s Registration System where this
data would be stored. The FCC is also seeking comment on whether to expand the biennial ownership
reporting requirement to include interests, entities and individuals that are not attributable because of (a) the
single majority shareholder exemption and (b) the exemption for interests held in eligible entities pursuant to
the higher EDP threshold. The Company has utilized the single majority shareholder exemption in reporting
ownership interests in the Company. The Company cannot predict whether these proposals will be adopted,
and if so, whether information provided by those persons with a reportable attributable interest in the
Company will be secure.

On March 25, 2010, the FCC issued a Public Notice implementing the Common Alerting Protocol
(‘‘CAP’’), which is an open, interoperable, data interchange format for collecting and distributing all-hazard
safety notiﬁcations and emergency warnings to multiple information networks, public safety alerting systems,
and personal communications devices. CAP will allow the Federal Emergency Management Agency
(‘‘FEMA’’), the National Weather Service (‘‘NWS’’), a State Governor, or any other authorized initiator of a
public alert and warning to automatically format and geo-target a particular alert simultaneously to the public
over multiple media platforms, such as television, radio, cable, cell phones and electronic highway signs. CAP
allows an alert initiator to send alerts speciﬁcally formatted for people with disabilities and for non-English
speakers. The Company has complied with the CAP requirements.

The 1996 Telecommunications Act lifted previous restrictions on a local telephone company providing

video programming directly to customers within the telephone company’s service areas. The law now permits
a telephone company to distribute video services either under the rules applicable to cable television systems
or as operators of so-called ‘‘wireless cable’’ systems as common carriers or under FCC rules regulating
‘‘open video systems’’ subject to common carrier regulations. We cannot predict what effect these services
may have on us. Likewise, we cannot predict what other changes might be considered in the future, nor can
we judge in advance what impact, if any, such changes might have on our business.

Executive Officers

Our current executive officers are:

Name

Edward K. Christian . . . . . . . . . .
Steven J. Goldstein . . . . . . . . . . .
Warren S. Lada . . . . . . . . . . . . . .
Samuel D. Bush . . . . . . . . . . . . . .
Marcia K. Lobaito . . . . . . . . . . . .

Catherine A. Bobinski . . . . . . . . .

Age

69
57
59
56
65

Position

President, Chief Executive Officer and Chairman; Director
Executive Vice President and Group Program Director
Executive Vice President, Operations
Senior Vice President, Treasurer and Chief Financial Officer
Senior Vice President, Corporate Secretary, and Director of
Business Affairs
Senior Vice President/Finance, Chief Accounting Officer and
Corporate Controller

Officers are elected annually by our Board of Directors and serve at the discretion of the Board. Set forth

below is information with respect to our executive officers.

Mr. Christian has been President, Chief Executive Officer and Chairman since our inception in 1986.

Mr. Goldstein has been Executive Vice President and Group Program Director since 1988. Mr. Goldstein

has been employed by us since our inception in 1986.

Mr. Lada has been Executive Vice President, Operations since March 2012. He was Senior Vice
President, Operations from 2000 to 2012 and Vice President, Operations from 1997 to 2000. From 1992 to
1997 he was Regional Vice President of our subsidiary, Saga Communications of New England, Inc.

Mr. Bush has been Senior Vice President since 2002 and Chief Financial Officer and Treasurer since
September 1997. He was Vice President from 1997 to 2002. From 1988 to 1997 he held various positions
with the Media Finance Group at AT&T Capital Corporation, including senior vice president.

Ms. Lobaito has been Senior Vice President since 2005, Director of Business Affairs and Corporate

Secretary since our inception in 1986 and Vice President from 1996 to 2005.

Ms. Bobinski has been Senior Vice President/Finance since March 2012 and Chief Accounting Officer
and Corporate Controller since September 1991. She was Vice President from March 1999 to March 2012.
Ms. Bobinski is a certiﬁed public accountant.

Item 1A. Risk Factors

The more prominent risks and uncertainties inherent in our business are described in more detail below.
However, these are not the only risks and uncertainties we face. Our business may face additional risks and
uncertainties that are unknown to us at this time.

Global Economic Conditions and Uncertainties May Continue to Affect our Business

We derive revenues from the sale of advertising and expenditures by advertisers tend to be cyclical and
are reﬂective of economic conditions. Periods of a slowing economy, recession or economic uncertainty may
be accompanied by a decrease in advertising. The global economic downturn that began in 2008 caused a
decline in advertising and marketing by our customers, which had an adverse effect on our revenue, proﬁt
margins and cash ﬂows. Global economic conditions have been slow to recover and remain uncertain. The
U.S. economy grew less than 2% in 2013 and unemployment remained relatively high. There can be no
assurance that any of the recent economic improvements will be broad based and sustainable, or that they will
enhance conditions in markets relevant to us. If economic conditions do not continue to improve, economic
uncertainty increases or economic conditions deteriorate again; global economic conditions may once again
adversely impact our business. Due to the continued uncertain pace of economic growth, we cannot predict
future revenue trends. Further, there can be no assurance that we will not experience future adverse effects
that may be material to our cash ﬂows, competitive position, ﬁnancial condition, results of operations, or our
ability to access capital.

The volatility in global ﬁnancial markets may also limit our ability to access the capital markets at a time

when we would like, or need, to do so, which could have an impact on our ﬂexibility to react to changing
economic and business conditions. Accordingly, if the economy does not fully recover or worsens, our
business, results of operations and ﬁnancial condition could be materially and adversely affected.

We Have Substantial Indebtedness and Debt Service Requirements

At December 31, 2013 our long-term debt (including the current portion thereof and our guarantee of
debt of Surtsey Media, LLC) was approximately $46,078,000. We have borrowed and expect to continue to
borrow to ﬁnance acquisitions and for other corporate purposes. Because of our indebtedness, a portion of our
cash ﬂow from operations is required for debt service. Our leverage could make us vulnerable to an increase
in interest rates, a downturn in our operating performance, or a decline in general economic conditions. The
term loan principal under our credit facility amortizes in equal installments of 5% of the term loan during
each year, however, upon satisfaction of certain conditions, as deﬁned in the credit facility, no amortization
payment is required. The credit facility is also subject to mandatory prepayment requirements, including but
not limited to, certain sales of assets, certain insurance proceeds, certain debt issuances and certain sales of
equity. Any outstanding balance under the credit facility will be due on the maturity date of May 31, 2018.
We believe that cash ﬂows from operations will be sufficient to meet our debt service requirements for interest
and scheduled payments of principal under the credit facility. However, if such cash ﬂow is not sufficient, we
may be required to sell additional equity securities, reﬁnance our obligations or dispose of one or more of our
properties in order to make such scheduled payments. We cannot be sure that we would be able to effect any
such transactions on favorable terms, if at all.

Our Debt Covenants Restrict our Financial and Operational Flexibility

Our credit facility contains a number of ﬁnancial covenants which, among other things, require us to
maintain speciﬁed ﬁnancial ratios and impose certain limitations on us with respect to investments, additional
indebtedness, dividends, distributions, guarantees, liens and encumbrances. Our ability to meet these ﬁnancial
ratios can be affected by operating performance or other events beyond our control, and we cannot assure you

that we will meet those ratios. Certain events of default under our credit facility could allow the lenders to
declare all amounts outstanding to be immediately due and payable and, therefore, could have a material
adverse effect on our business. We have pledged substantially all of our assets (excluding our FCC licenses
and certain other assets) in support of the credit facility and each of our subsidiaries has guaranteed the credit
facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets)
in support of the credit facility.

We Depend on Key Personnel

Our business is partially dependent upon the performance of certain key individuals, particularly

Edward K. Christian, our President and CEO. Although we have entered into employment and
non-competition agreements with Mr. Christian, which terminate on March 31, 2018, and certain other key
personnel, including on-air personalities, we cannot be sure that such key personnel will remain with us. We
do not maintain key man life insurance on Mr. Christian’s life. We can give no assurance that all or any of
these employees will remain with us or will retain their audiences. Many of our key employees are at-will
employees who are under no legal obligation to remain with us. Our competitors may choose to extend offers
to any of these individuals on terms which we may be unwilling to meet. In addition, any or all of our key
employees may decide to leave for a variety of personal or other reasons beyond our control. Furthermore, the
popularity and audience loyalty of our key on-air personalities is highly sensitive to rapidly changing public
tastes. A loss of such popularity or audience loyalty is beyond our control and could limit our ability to
generate revenues.

We Depend on Key Stations

Historically our top six markets when combined represented 44%, 44% and 43% of our net operating

revenue for the years ended December 31, 2013, 2012 and 2011, respectively. Accordingly, we may have
greater exposure to adverse events or conditions that affect the economy in any of these markets, which could
have a material adverse effect on our revenue, results of operations and ﬁnancial condition.

Local and National Economic Conditions May Affect our Advertising Revenue

Our ﬁnancial results are dependent primarily on our ability to generate advertising revenue through rates
charged to advertisers. The advertising rates a station is able to charge are affected by many factors, including
the general strength of the local and national economies. Generally, advertising declines during periods of
economic recession or downturns in the economy. Our revenue has been and is likely to be adversely affected
during such periods, whether they occur on a national level or in the geographic markets in which we operate.
During such periods we may also be required to reduce our advertising rates in order to attract available
advertisers. Such a decline in advertising rates could also have a material adverse effect on our revenue,
results of operations and ﬁnancial condition.

Our Stations Must Compete for Advertising Revenues in Their Respective Markets

Both radio and television broadcasting are highly competitive businesses. Our stations compete for

listeners/viewers and advertising revenues within their respective markets directly with other radio and/or
television stations, as well as with other media, such as broadcast television and/or radio (as applicable), cable
television and/or radio, satellite television and/or satellite radio systems, newspapers, magazines, direct mail,
the Internet, coupons and billboard advertising. Audience ratings and market shares are subject to change, and
any change in a particular market could have a material adverse effect on the revenue of our stations located
in that market. While we already compete in some of our markets with other stations with similar
programming formats, if another radio station in a market were to convert its programming format to a format
similar to one of our stations, if a new station were to adopt a comparable format or if an existing competitor
were to strengthen its operations, our stations could experience a reduction in ratings and/or advertising
revenue and could incur increased promotional and other expenses. Other radio or television broadcasting
companies may enter into the markets in which we operate or may operate in the future. These companies
may be larger and have more ﬁnancial resources than we have. We cannot assure you that any of our stations
will be able to maintain or increase their current audience ratings and advertising revenues.

Our Success Depends on our Ability to Identify, Consummate and Integrate Acquired Stations

As part of our strategy, we have pursued and may continue to pursue acquisitions of additional radio and
television stations, subject to the terms of our credit facility. Broadcasting is a rapidly consolidating industry,
with many companies seeking to consummate acquisitions and increase their market share. In this
environment, we compete and will continue to compete with many other buyers for the acquisition of radio
and television stations. Some of those competitors may be able to outbid us for acquisitions because they have
greater ﬁnancial resources. As a result of these and other factors, our ability to identify and consummate
future acquisitions is uncertain.

Our consummation of all future acquisitions is subject to various conditions, including FCC and other
regulatory approvals. The FCC must approve any transfer of control or assignment of broadcast licenses. In
addition, acquisitions may encounter intense scrutiny under federal and state antitrust laws. Our future
acquisitions may be subject to notiﬁcation under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and to a waiting period and possible review by the Department of Justice and the Federal Trade Commission.
Any delays, injunctions, conditions or modiﬁcations by any of these federal agencies could have a negative
effect on us and result in the abandonment of all or part of attractive acquisition opportunities. We cannot
predict whether we will be successful in identifying future acquisition opportunities or what the consequences
will be of any acquisitions.

Certain of our acquisitions may prove unproﬁtable and fail to generate anticipated cash ﬂows. In addition,

the success of any completed acquisition will depend on our ability to effectively integrate the acquired
stations. The process of integrating acquired stations may involve numerous risks, including difficulties in the
assimilation of operations, the diversion of management’s attention from other business concerns, risk of
entering new markets, and the potential loss of key employees of the acquired stations.

Future Impairment of our FCC Broadcasting Licenses Could Affect our Operating Results

As of December 31, 2013, our FCC broadcasting licenses represented 45.8% of our total assets. We are

required to test our FCC broadcasting licenses for impairment on an annual basis, or more frequently if events
or changes in circumstances indicate that our FCC broadcasting licenses might be impaired which may result
in future impairment losses. For further discussion, see Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Critical Accounting Policies and Estimates included with this
Form 10-K.

Our Business is Subject to Extensive Federal Regulation

The broadcasting industry is subject to extensive federal regulation which, among other things, requires

approval by the FCC of transfers, assignments and renewals of broadcasting licenses, limits the number of
broadcasting properties that may be acquired within a speciﬁc market, and regulates programming and
operations. For a detailed description of the material regulations applicable to our business, see ‘‘Federal
Regulation of Radio and Television Broadcasting’’ and ‘‘Other FCC Requirements’’ in Item 1 of this
Form 10-K. Failure to comply with these regulations could, under certain circumstances and among other
things, result in the denial or revocation of FCC licenses, shortened license renewal terms, monetary ﬁnes or
other penalties which would adversely affect our proﬁtability. Changes in ownership requirements could limit
our ability to own or acquire stations in certain markets.

New Federal Regulations or Fees Could Affect our Broadcasting Operations

There has been proposed legislation in the past and there could be again in the future that requires radio

broadcasters to pay additional fees such as a spectrum fee for the use of the spectrum or a royalty fee to
record labels and performing artists for use of their recorded music. Currently, we pay royalties to song
composers and publishers indirectly through third parties. Any proposed legislation that is adopted into law
could add an additional layer of royalties to be paid directly to the record labels and artists. While this
proposed legislation did not become law, it has been the subject of considerable debate and activity by the
broadcast industry and other parties affected by the legislation. It is currently unknown what impact any
potential required royalty payments would have on our results of operations, cash ﬂows or ﬁnancial position.

The FCC’s Vigorous Enforcement of Indecency Rules Could Affect our Broadcasting Operations

Federal law regulates the broadcast of obscene, indecent or profane material. The FCC has increased its

enforcement efforts relating to the regulation of indecency violations, and Congress has increased the penalties
for broadcasting obscene, indecent or profane programming, and these penalties may potentially subject
broadcasters to license revocation, renewal or qualiﬁcation proceedings in the event that they broadcast such
material. In addition, the FCC’s heightened focus on the indecency regulations against the broadcast industry
may encourage third parties to oppose our license renewal applications or applications for consent to acquire
broadcast stations. Because the FCC may investigate indecency complaints prior to notifying a licensee of the
existence of a complaint, a licensee may not have knowledge of a complaint unless and until the complaint
results in the issuance of a formal FCC letter of inquiry or notice of apparent liability for forfeiture. We
have stations that are currently subject to indecency-related inquiries and/or proposed ﬁnes at the FCC’s
Enforcement Bureau, and we may in the future become subject to additional inquiries or proceedings related
to our stations’ broadcast of obscene, indecent or profane material. To the extent that any inquiries or other
proceedings result in the imposition of ﬁnes, a settlement with the FCC, revocation of any of our station
licenses or denials of license renewal applications, our result of operations and business could be materially
adversely affected.

New Technologies May Affect our Broadcasting Operations

The FCC has and is considering ways to introduce new technologies to the broadcasting industry,
including satellite and terrestrial delivery of digital audio broadcasting and the standardization of available
technologies which signiﬁcantly enhance the sound quality of AM broadcasters. We are unable to predict the
effect such technologies may have on our broadcasting operations. The capital expenditures necessary to
implement such technologies could be substantial. Moreover, the FCC may impose additional public service
obligations on television broadcasters in return for their use of the digital television spectrum. This could add
to our operational costs. One issue yet to be resolved is the extent to which cable systems will be required to
carry broadcasters’ new digital channels. Our television stations are highly dependent on their carriage by
cable systems in the areas they serve. FCC rules that impose no or limited obligations on cable systems to
carry the digital television signals of television broadcast stations in their local markets could adversely affect
our television operations.

The Company is Controlled by our President, Chief Executive Officer and Chairman

As of March 3, 2014, Edward K. Christian, our President, Chief Executive Officer and Chairman, holds

approximately 62% of the combined voting power of our Common Stock (not including options to acquire
Class B Common Stock and based on Class B shares generally entitled to ten votes per share). As a result,
Mr. Christian generally is able to control the vote on most matters submitted to the vote of stockholders and,
therefore, is able to direct our management and policies, except with respect to (i) the election of the
two Class A directors, (ii) those matters where the shares of our Class B Common Stock are only entitled to
one vote per share, and (iii) other matters requiring a class vote under the provisions of our certiﬁcate of
incorporation, bylaws or applicable law. For a description of the voting rights of our Common Stock, see
Note 10 of the Notes to Consolidated Financial Statements included with this Form 10-K. Without the
approval of Mr. Christian, we will be unable to consummate transactions involving an actual or potential
change of control, including transactions in which stockholders might otherwise receive a premium for their
shares over then-current market prices.

We May Experience Volatility in the Market Price of our Common Stock

The market price of our common stock has ﬂuctuated in the past and may continue to be volatile. In
addition to stock market ﬂuctuations due to economic or other factors, the volatility of our shares may be
inﬂuenced by lower trading volume and concentrated ownership relative to many of our publicly-held
competitors. Because several of our shareholders own signiﬁcant portions of our outstanding shares, our stock
is relatively less liquid and therefore more susceptible to price ﬂuctuations than many other companies’ shares.
If these shareholders were to sell all or a portion of their holdings of our common stock, then the market price
of our common stock could be negatively affected. Investors should be aware that they could experience
short-term volatility in our stock if such shareholders decide to sell all or a portion of their holdings of our
common stock at once or within a short period of time.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters is located in Grosse Pointe Farms, Michigan. The types of properties required

to support each of our stations include offices, studios, and transmitter and antenna sites. A station’s studios
are generally housed with its offices in business districts. The transmitter sites and antenna sites are generally
located so as to provide maximum market coverage for our stations’ broadcast signals.

As of December 31, 2013 the studios and offices of 26 of our 31 operating locations, including our
corporate headquarters in Michigan, are located in facilities we own. The remaining studios and offices are
located in leased facilities with lease terms that expire in 8 months to 10 years. We own or lease our
transmitter and antenna sites, with lease terms that expire in 5 months to 76 years. We do not anticipate any
difficulties in renewing those leases that expire within the next ﬁve years or in leasing other space, if required.

No one property is material to our overall operations. We believe that our properties are in good

condition and suitable for our operations.

We own substantially all of the equipment used in our broadcasting business.

Item 3. Legal Proceedings

We currently and from time to time are involved in litigation incidental to the conduct of our business.

We are not a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on our ﬁnancial position, cash ﬂows or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

On January 16, 2013 the Company consummated a four-for-three stock split of its Class A and Class B

Common Stock, resulting in an increase of issued and outstanding shares of approximately 1,219,000 and
199,000, respectively, for holders of record as of the close of business on December 28, 2012.

The Company’s Class A Common Stock trades on the NYSE MKT under the ticker symbol SGA. There

is no public trading market for the Company’s Class B Common Stock. The following table sets forth the
high and low sales prices of the Class A Common Stock as reported by the NYSE MKT for the calendar
quarters indicated (prices for periods prior to the four-for-three stock split are adjusted for such split):

Year
2012:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter

2013:

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter

High

Low

$35.99
$28.92
$32.11
$38.33

$51.61
$49.86
$51.99
$54.00

$26.44
$25.55
$25.31
$27.64

$33.23
$39.64
$43.48
$43.48

The closing price for the Company’s Class A Common Stock on March 3, 2014 as reported by the NYSE

MKT was $50.81. As of March 3, 2014, there were approximately 193 holders of record of the Company’s
Class A Common Stock, and one holder of the Company’s Class B Common Stock.

Dividends

On November 21, 2013 the Company’s Board of Directors declared a special cash dividend of $1.80 per
share on its Classes A and B Common Stock. This dividend totaling $10.3 million was paid on December 12,
2013 to shareholders of record on December 2, 2013. On October 2, 2012 the Company’s Board of Directors
declared a special cash dividend of $1.24 per share on its Classes A and B Common Stock. This dividend
totaling $7.0 million was paid on December 3, 2012 to shareholders of record on November 15, 2012.

Securities Authorized for Issuance Under Equity Compensation Plan Information

The following table sets forth as of December 31, 2013, the number of securities outstanding under our

equity compensation plans, the weighted average exercise price of such securities and the number of securities
available for grant under these plans:

Plan Category
Equity Compensation Plans Approved by Stockholders:

(a)

(b)

Number of Shares
to be Issued
Upon Exercise of
Outstanding
Options Warrants,
and Rights

Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights

Employees’ 401(k) Savings and Investment Plan . . . . .
2003 Stock Option Plan . . . . . . . . . . . . . . . . . . . .
2005 Incentive Compensation Plan . . . . . . . . . . . . .

—
13,323
270,526(1)

$ —
$ 57.93
$31.893(2)

Equity Compensation Plans Not Approved by

Stockholders:
None . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
283,849

432,773
—
515,182

—
947,955

Includes 50,062 shares of restricted stock.

(1)
(2) Weighted-Average Exercise Price of Outstanding Options.

Recent Sales of Unregistered Securities

Not applicable.

Issuer Purchases of Equity Securities

There were no repurchases of our equity securities during the quarter ended December 31, 2013.

Performance Graph

COMMON STOCK PERFORMANCE

Set forth below is a line graph comparing the cumulative total stockholder return for the years ended

December 31, 2009, 2010, 2011, 2012 and 2013 of our Class A Common Stock against the cumulative total
return of the NYSE MKT Stock Market (US Companies) and a Peer Group selected by us consisting of the
following radio and/or television broadcast companies: Beasley Broadcast Group, Inc., CBS Corp., CC Media
Holdings, Inc., Cumulus Media Inc., Emmis Communications Corp., Entercom Communications Corp.,
Entravision Communications Corp., Journal Communications, Inc., The Nielsen Company, Radio One Inc.,
Saga Communications, Inc., Salem Communications Corp., Sirius XM Radio Inc. and Spanish Broadcasting
System, Inc. The graph and table assume that $100 was invested on December 31, 2008, in each of our
Class A Common Stock, the NYSE MKT Stock Market (US Companies) and the Peer Group and that all
dividends were reinvested. The information contained in this graph shall not be deemed to be ‘‘soliciting
material’’ or ‘‘ﬁled’’ with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the
extent that we speciﬁcally incorporate it by reference into a document ﬁled under the Securities Act or the
Exchange Act.

Comparison of Five-Year Cumulative Total Return

Saga Communications Inc.

NYSE MKT Stock Market (US
Companies)

Self-Determined Peer Group

1200

1000

S
R
A
L
L
O
D

800

600

400

200

1,094.4

766.5

170.4

2008

2009

2010

2011

2012

2013

Legend

Symbol

CRSP Total Returns Index for:

12/08

12/09

12/10

12/11

12/12

12/13

Saga Communications, Inc.
NYSE MKT Stock Market (US Companies)
Self-Determined Peer Group

100.0
100.0
100.0

190.1
122.3
203.1

393.9
155.5
327.4

566.5
141.8
376.4

733.3
155.4
499.2

1,094.4
170.4
766.5

The comparisons in the above table are required by the SEC. This table is not intended to forecast or to

be indicative of any future return of our Class A Common Stock.

Item 6. Selected Financial Data

OPERATING DATA:
. . . . . . . . . . . .
Net Operating Revenue
Station Operating Expense . . . . . . . . . .
Corporate General and Administrative . . .
Gain on Asset Exchange . . . . . . . . . . . .
Impairment of Intangible Assets . . . . . . .
Operating Income (Loss) From

2013(1)(2)

$129,478
92,977
8,172
—
2,033

2012(1)(2)

Years Ended December 31,
2010(1)(2)
2011(1)(2)
(In thousands except per share amounts)

2009(1)(2)

$130,259
90,288
7,960
—
—

$125,273
90,929
7,590
—
—

$125,833
90,335
7,274
—
—

$118,899
92,079
7,944
(495)
17,153

Continuing Operations

. . . . . . . . . . .
Interest Expense . . . . . . . . . . . . . . . . .

$ 26,296
1,305
$

$ 32,011
1,733
$

$ 26,754
3,420
$

$ 28,224
5,622
$

$ 2,218
$ 4,948

Net Income (Loss):

From Continuing Operations
. . . . . . .
From Discontinued Operations . . . . . .
Net Income (Loss) . . . . . . . . . . . . . .

$ 15,050
223
$ 15,273

$ 18,060
(135)
$ 17,925

$ 12,885
(254)
$ 12,631

$ 15,464
(328)
$ 15,136

$ (2,031)
(550)
$ (2,581)

Basic Earnings (Loss) Per Share:
From Continuing Operations
. . . . . . .
From Discontinued Operations . . . . . .
Earnings (Loss) Per Share . . . . . . . . .
. . . .

Weighted Average Common Shares

Diluted Earnings (Loss) Per Share:
. . . . . . .
From Continuing Operations
From Discontinued Operations . . . . . .
Earnings (Loss) Per Share . . . . . . . . .
Weighted Average Common and Common
Equivalent Shares . . . . . . . . . . . . . . .

Cash Dividends Declared Per Common

2.62
0.04
2.66
5,681

2.60
0.04
2.64

3.19
(0.02)
3.17
5,659

3.18
(0.02)
3.16

2.28
(0.04)
2.24
5,651

2.28
(0.05)
2.23

2.74
(0.06)
2.68
5,640

2.74
(0.06)
2.68

(0.36)
(0.10)
(0.46)
5,609

(0.36)
(0.10)
(0.46)

5,745

5,672

5,656

5,641

5,609

Share . . . . . . . . . . . . . . . . . . . . . . .

1.80

1.24

—

BALANCE SHEET DATA:
. . . . . . . . . . . . .
Working Capital
Net Property and Equipment
. . . . .
Net Intangible and Other Assets . . .
Total Assets
. . . . . . . . . . . . . . . .
Long-term Debt Including Current

Portion . . . . . . . . . . . . . . . . . .
Stockholders’ Equity . . . . . . . . . .

2013

2012

December 31,
2011
(In thousands)

2010

2009

$ 28,079
$ 56,337
$ 94,806
$193,224

$ 27,066
$ 58,462
$ 98,434
$197,330

$ 16,322
$ 60,622
$ 98,752
$190,334

$ 18,130
$ 62,753
$100,492
$199,803

$ 46,078
$109,701

$ 58.828
$104,209

$ 69,078
$ 92,975

$ 96,078
$ 80,078

7,753
$
$ 66,115
$ 99,342
$202,351

$121,078
$ 64,093

(1)

(2)

In January 2013, the Company consummated a four-for-three stock split of its Class A and Class B
Common Stock. All share and per share information prior to the split has been adjusted to reﬂect the
retroactive equivalent change in the weighted average shares.
In January 2013, the Company sold WXVT-TV in Greenville, Mississippi. The operating results of
WXVT-TV have been reported as discontinued operations for all periods presented.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Item 1. Business, Item 6. Selected Financial

Data and the consolidated ﬁnancial statements and notes thereto of Saga Communications, Inc. and its
subsidiaries contained elsewhere herein. The following discussion is presented on both a consolidated and
segment basis. Corporate general and administrative expenses, interest expense, other (income) expense, and
income tax provision are managed on a consolidated basis and are reﬂected only in our discussion of
consolidated results.

For purposes of business segment reporting, we have aligned operations with similar characteristics into

two business segments: Radio and Television. The Radio segment includes twenty-three markets, which
includes all ninety-one of our radio stations and ﬁve radio information networks. The Television segment
includes two markets and consists of four television stations and four low power television (‘‘LPTV’’)
stations. The discussion of our operating performance focuses on segment operating income because we
manage our segments primarily on operating income. Operating performance is evaluated for each individual
market.

We use certain ﬁnancial measures that are not calculated in accordance with generally accepted
accounting principles in the United States of America (GAAP) to assess our ﬁnancial performance. For
example, we evaluate the performance of our markets based on ‘‘station operating income’’ (operating income
plus corporate general and administrative expenses, depreciation and amortization). Station operating income
is generally recognized by the broadcasting industry as a measure of performance, is used by analysts who
report on the performance of the broadcasting industry and it serves as an indicator of the market value of a
group of stations. In addition, we use it to evaluate individual stations, market-level performance, overall
operations and as a primary measure for incentive based compensation of executives and other members of
management. Station operating income is not necessarily indicative of amounts that may be available to us for
debt service requirements, other commitments, reinvestment or other discretionary uses. Station operating
income is not a measure of liquidity or of performance in accordance with GAAP, and should be viewed as a
supplement to, and not a substitute for our results of operations presented on a GAAP basis.

General

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast
properties. We actively seek and explore opportunities for expansion through the acquisition of additional
broadcast properties. We review acquisition opportunities on an ongoing basis.

Radio Segment

Our radio segment’s primary source of revenue is from the sale of advertising for broadcast on our

stations. Depending on the format of a particular radio station, there are a predetermined number of
advertisements available to be broadcast each hour.

Most advertising contracts are short-term and generally run for a few weeks only. The majority of our
revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff. For the
years ended December 31, 2013, 2012 and 2011, approximately 88%, 88% and 85%, respectively, of our radio
segment’s gross revenue was from local advertising. To generate national advertising sales, we engage
independent advertising sales representative ﬁrms that specialize in national sales for each of our broadcast
markets.

Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue,

generally have been lowest during the winter months, which include the ﬁrst quarter of each year. In 2012 we
had a signiﬁcant increase in revenue due to political advertising. Political revenue signiﬁcantly decreased in
2013 as it was a non-election year.

Our net operating revenue, station operating expense and operating income vary from market to market

based upon the market’s rank or size which is based upon population and the available radio advertising
revenue in that particular market.

The broadcasting industry and advertising in general, is inﬂuenced by the state of the overall economy,

including unemployment rates, inﬂation, energy prices and consumer interest rates. Our stations broadcast
primarily in small to midsize markets. Historically, these markets have been more stable than major
metropolitan markets during downturns in advertising spending, but may not experience increases in such
spending as signiﬁcant as those in major metropolitan markets in periods of economic improvement.

Our ﬁnancial results are dependent on a number of factors, the most signiﬁcant of which is our 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. In a number of our markets, this is measured by periodic reports generated by independent
national rating services. In the remainder of our markets it is measured by the results advertisers obtain
through the actual running of an advertising schedule. Advertisers measure these results based on increased
demand for their goods or services and/or actual revenues generated from such demand. 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, target marketing capability of radio
compared to other advertising media, and signal strength.

When we acquire and/or begin to operate a station or group of stations we generally increase
programming and advertising and promotion expenses to increase our share of our target demographic
audience. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan
on achieving in two to ﬁve years. During periods of economic downturns, or when the level of advertising
spending is ﬂat or down across the industry, this strategy may result in the appearance that our cost of
operations are increasing at a faster rate than our growth in revenues, until such time as we achieve our
targeted levels of revenue for the acquired station or group of stations.

The number of advertisements that can be broadcast without jeopardizing listening levels (and the
resulting ratings) is limited in part by the format of a particular radio station. Our stations strive to maximize
revenue by constantly managing the number of commercials available for sale and by adjusting prices based
upon local market conditions and ratings. While there may be shifts from time to time in the number of
advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on
a particular station generally does not vary signiﬁcantly from year to year. Any change in our revenue, with
the exception of those instances where stations are acquired or sold, is generally the result of inventory sell
out ratios and pricing adjustments, which are made to ensure that the station efficiently utilizes available
inventory.

Our radio stations employ a variety of programming formats. We periodically perform market research,

including music evaluations, focus groups and strategic vulnerability studies. Because reaching a large and
demographically attractive audience is crucial to a station’s ﬁnancial success, we endeavor to develop strong
listener loyalty. Our stations also employ audience promotions to further develop and secure a loyal following.
We believe that the diversiﬁcation of formats on our radio stations helps to insulate us from the effects of
changes in musical tastes of the public on any particular format.

The primary operating expenses involved in owning and operating radio stations are employee salaries,

sales commissions, programming expenses, depreciation, and advertising and promotion expenses.

The radio broadcasting industry is subject to rapid technological change, evolving industry standards and

the emergence of new media technologies and services. These new technologies and media are gaining
advertising share against radio and other traditional media.

We are continuing to expand our digital initiative to provide a seamless experience across numerous

platforms to allow our listeners and viewers to connect with our products where and when they want. Over
the past year, we completed a project to bring all of our websites in house while making them fully accessible
on mobile devices. This change will provide new avenues for revenue and improve our overall digital reach.

In addition, we continue the rollout of HD RadioTM. HD RadioTM utilizes digital technology that

provides improved sound quality over standard analog broadcasts and also allows for the delivery of
additional channels of diversiﬁed programming or data streams in each radio market.

During the years ended December 31, 2013, 2012 and 2011, our Columbus, Ohio; Des Moines, Iowa;

Manchester, New Hampshire; Milwaukee, Wisconsin and Norfolk, Virginia markets, when combined,
represented approximately 34%, 35%, and 34%, respectively, of our consolidated net operating revenue. An
adverse change in any of these radio markets or relative market position in those markets could have a
signiﬁcant impact on our operating results as a whole.

The following tables describe the percentage of our consolidated net operating revenue represented by

each of these markets:

Percentage of Consolidated
Net Operating Revenue
for the Years
Ended December 31,
2012

2011

2013

Market:
Columbus, Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Des Moines, Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manchester, New Hampshire . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Milwaukee, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Norfolk, Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7%
7%
5%
10%
5%

7%
6%
6%
11%
5%

6%
7%
5%
12%
4%

We have experienced a signiﬁcant decline in our net operating revenue in our Milwaukee, Wisconsin

market for the past three years. This decline in net operating revenue has directly affected the operating
income of our radio stations in this market. These reductions are attributable to a combination of aggressive
competitive pricing due to a soft economy and new ratings methodology that has changed the competitive
pricing landscape in the market; an increase in the demand for 30 second spots that has caused a reduction in
both our rates and inventory available as we control the number of units per hour to provide more
entertainment for our listeners; and a decline in certain key category spending in the market.

During the years ended December 31, 2013, 2012 and 2011, the radio stations in our ﬁve largest markets

when combined, represented approximately 39%, 40% and 36%, respectively, of our consolidated station
operating income. The following tables describe the percentage of our consolidated station operating income
represented by each of these markets:

Percentage of
Consolidated Station
Operating Income(*)
for the Years
Ended December 31,
2012

2013

2011

8%
5%
8%
11%
7%

8%
5%
8%
13%
6%

6%
5%
7%
15%
3%

(*) Operating income plus corporate general and administrative expenses, depreciation and amortization.

Television Segment

Our television segment’s primary source of revenue is from the sale of advertising for broadcast on our

stations. The number of advertisements available for broadcast on our television stations is limited by network
affiliation and syndicated programming agreements and, with respect to children’s programs, federal
regulation. Our television stations’ local market managers determine the number of advertisements to be
broadcast in locally produced programs only, which are primarily news programming and occasionally local
sports or information shows.

Our net operating revenue, station operating expense and operating income vary from market to market

based upon the market’s rank or size, which is based upon population, available television advertising revenue
in that particular market, and the popularity of programming being broadcast.

Our ﬁnancial results are dependent on a number of factors, the most signiﬁcant of which is our 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 periodic 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 through locally produced news, sports and weather
and as a result of syndication and network affiliation agreements, local market competition, the ability of
television broadcasting to reach a mass appeal market compared to other advertising media, and signal
strength including cable/satellite coverage, and government regulation and policies.

Our stations strive to maximize revenue by constantly adjusting prices for our commercial spots based
upon local market conditions, advertising demands and ratings. While there may be shifts from time to time in
the number of advertisements broadcast during a particular time of day, the total number of advertisements
broadcast on a station generally does not vary signiﬁcantly from year to year. Any change in our revenue,
with the exception of those instances where stations are acquired or sold, is generally the result of pricing
adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Because audience ratings in the local market are crucial to a station’s ﬁnancial success, we endeavor to

develop strong viewer loyalty by providing locally produced news, weather and sports programming. We
believe that this emphasis on the local market provides us with the viewer loyalty we are trying to achieve.

Most of our revenue is generated from local advertising, which is sold primarily by each television
markets’ sales staff. For the years ended December 31, 2013, 2012 and 2011, approximately 82%, 85% and
81%, respectively, of our television segment’s gross revenue was from local advertising. To generate national
advertising sales, we engage independent advertising sales representatives that specialize in national sales for
each of our television markets.

Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue,

The primary operating expenses involved in owning and operating television stations are employee
salaries, sales commissions, programming expenses, including news production and the cost of acquiring
certain syndicated programming, depreciation, and advertising and promotion expenses.

Our television market in Joplin, Missouri represented approximately 9%, 9% and 9% of our net operating

revenues, and approximately 12%, 11% and 10% of our consolidated station operating income (operating
income plus corporate general and administrative expenses, depreciation and amortization) for the years ended
December 31, 2013, 2012 and 2011, respectively.

Results of Operations

The following tables summarize our results of operations for the three years ended December 31, 2013,

2012 and 2011.

Consolidated Results of Operations

2013 vs. 2012

2012 vs. 2011

Net operating revenue . . . . . . . . . . . . . $129,478 $130,259 $125,273
90,929
Station operating expense . . . . . . . . . . .
7,590
Corporate G&A . . . . . . . . . . . . . . . . .
Impairment of intangible assets
—
. . . . . . .
Operating income from continuing

92,977
8,172
2,033

90,288
7,960
—

Years Ended December 31,
2012

2013

2011

$ Increase
(Decrease)

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s and per share information)
$ (781)
2,689
212
2,033

(0.6)% $ 4,986
(641)
3.0%
370
2.7%
—

N/M

operations . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . .
Write-off debt issuance costs . . . . . . . . .
Other (income) expense, net
. . . . . . . . .
Income from continuing operations before

income tax . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . .
Income from continuing operations, net of

income tax . . . . . . . . . . . . . . . . . .

Income (loss) from discontinued

26,296
1,305
55
(106)

25,042
9,992

32,011
1,733
—
279

29,999
11,939

26,754
3,420
1,326
519

21,489
8,604

(5,715)
(428)
55
(385)

(4,957)
(1,947)

5,257
(17.9)%
(24.7)% (1,687)
(1,326)
N/M
(240)
N/M

(16.5)%
(16.3)%

8,510
3,335

39.6%
38.8%

15,050

18,060

12,885

(3,010)

(16.7)%

5,175

40.2%

operations, net of income tax . . . . . . .

(254)
Net income . . . . . . . . . . . . . . . . . . . . $ 15,273 $ 17,925 $ 12,631

(135)

223

358
$(2,652)

N/M
(119)
(14.8)% $ 5,294

(46.9)%
41.9%

Earnings (loss) per share:
From continuing operations . . . . . . . . . . $
From discontinued operations
Earnings per share (fully diluted)

. . . . . . . .

. . . . . . $

2.60 $
0.04
2.64 $

3.18 $
(0.02)
3.16 $

2.28
(0.05)
2.23

$ (0.58)
0.06
$ (0.52)

(18.3)% $ 0.90
N/M
0.03
(16.5)% $ 0.93

39.5%
60.0%
41.7%

Radio Broadcasting Segment

2013 vs. 2012

2012 vs. 2011

Years Ended December 31,
2012

2011

2013

% Increase
(Decrease)

$ Increase
(Decrease)

% Increase
(Decrease)

4.0%
(0.7)%
4.9%
—%

19.7%
(49.3)%
N/M
(46.2)%

Net operating revenue . . . . . . . . . . . . . $109,818 $111,763 $108,938
79,130
Station operating expense . . . . . . . . . . .
Impairment of intangible assets
—
. . . . . . .
Operating income . . . . . . . . . . . . . . . . $ 27,852 $ 33,771 $ 29,808

77,992
—

79,933
2,033

(1.7)% $ 2,825
(1,138)
2.5%
N/M
—
(17.5)% $ 3,963

2.6%
(1.4)%
—%
13.3%

$ Increase
(Decrease)
(In thousands, except %’s)
$(1,945)
1,941
2,033
$(5,919)

Television Broadcasting Segment

2013 vs. 2012

2012 vs. 2011

Years Ended December 31,
2012

2011

2013

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s)
$1,164
748
$ 416

$16,335
11,799
$ 4,536

6.3%
6.1%
6.7%

$ Increase
(Decrease)

% Increase
(Decrease)

$2,161
497
$1,664

13.2%
4.2%
36.7%

Net operating revenue . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . .

$19,660
13,044
$ 6,616

$18,496
12,296
$ 6,200

N/M=Not meaningful

Reconciliation of segment operating income to consolidated operating income from continuing
operations:

Year Ended December 31, 2013:

Radio

Television

Corporate
and Other

Consolidated

Net operating revenue
. . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . .
Operating income (loss) from continuing

(In thousands)

$109,818
79,933
—
2,033

$19,660
13,044
—
—

$ —
—
8,172
—

$129,478
92,977
8,172
2,033

operations . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 27,852

$ 6,616

$(8,172)

$ 26,296

Year Ended December 31, 2012:

Radio

Television

Corporate
and Other

Consolidated

Net operating revenue
. . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . .
Operating income (loss) from continuing

(In thousands)

$111,763
77,992
—

$18,496
12,296
—

$ —
—
7,960

$130,259
90,288
7,960

operations . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 33,771

$ 6,200

$(7,960)

$ 32,011

Year Ended December 31, 2011:

Radio

Television

Corporate
and Other

Consolidated

(In thousands)

$108,938
79,130
—

$16,335
11,799
—

$ —
—
7,590

$125,273
90,929
7,590

operations . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 29,808

$ 4,536

$(7,590)

$ 26,754

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Consolidated

For the year ended December 31, 2013, consolidated net operating revenue was $129,478,000 compared

with $130,259,000 for year ended December 31, 2012, a decrease of $781,000 or less than 1%. Gross local
revenue, gross national revenue and gross retransmission consent revenue increased $3,221,000, $821,000
and $438,000, respectively, from 2012. The increase in gross local revenue was primarily attributable to
improvements in our Columbus, OH, Norfolk, VA and Victoria, TX markets, partially offset by a decline in
gross local revenue in our Portland, ME market. National advertising was up signiﬁcantly in our Joplin,
MO market, but down in our radio segment. Gross political revenue decreased $5,928,000 for the year ended
December 31, 2013 as compared to 2012. The decrease in gross political revenue was attributable to reduced
political advertising in 2013, as compared to 2012, which was an election year.

Station operating expense was $92,977,000 for the year ended December 31, 2013, compared with
$90,288,000 for the year ended December 31, 2012, an increase of $2,689,000 or 3%. The increase was
primarily a result of $851,000 in non-recurring credits received in 2012 from two of our performance rights
organizations for fees previously paid. Sales commission and selling expenses increased $497,000 in 2013 as a
result of increased local revenue. Programming salaries increased $445,000 in 2013 as a result of
programming contractual agreements and health care cost increased $527,000.

Operating income from continuing operations for the year ended December 31, 2013 was $26,296,000

compared to $32,011,000 for the year ended December 31, 2012, a decrease of $5,715,000, or 18%. The
decrease was primarily a result of the increase in station operating expense combined with the decline in net
operating revenue, described above, and a $212,000, or 3%, increase in corporate general and administrative
expense. Operating income for 2013 also includes a non-cash impairment charge of $2,033,000 in connection

with our review of broadcast licenses during the fourth quarter of 2013 (see Note 2 in the accompanying notes
to the consolidated ﬁnancial statements).

We recognized income from discontinued operations of $223,000 net of tax from the sale of our

Greenville, Mississippi TV station in January 2013. Please refer to Note 3 — Discontinued Operations, in the
accompanying notes to the consolidated ﬁnancial statements for more information on our discontinued
operations.

We generated net income of $15,273,000 ($2.64 per share on a fully diluted basis) for the year ended
December 31, 2013, compared with $17,925,000 ($3.16 per share on a fully diluted basis) for the year ended
December 31, 2012, a decrease of $2,652,000 or 15%. In 2013 we had a decrease in operating income from
continuing operations of $5,715,000, as described above, and a decrease in interest expense of $428,000. The
decrease in interest expense was attributable to an average decrease in market interest rates of 0.356% and a
decrease in average debt outstanding. Income tax expense decreased $1,947,000 in 2013 as a result of current
year operating performance and the fourth quarter non-cash impairment charge.

Radio Segment

For the year ended December 31, 2013, net operating revenue of the radio segment was $109,818,000

compared with $111,763,000 for the year ended December 31, 2012, a decrease of $1,945,000 or 2%. Gross
local revenue increased $1,829,000 in 2013. The increase in gross local revenue was primarily attributable to
improvements in our Columbus, OH and Norfolk, VA markets, partially offset by a decline in gross local
revenue in our Portland, ME market. Gross political revenue decreased $4,438,000 for the year ended
December 31, 2013 as compared to 2012. The decrease in gross political revenue was attributable to reduced
political advertising in 2013, as compared to 2012, which was an election year.

Station operating expense for the radio segment was $79,933,000 for the year ended December 31, 2013,

compared with $77,992,000 for the year ended December 31, 2012, an increase of $1,941,000 or 2%. The
increase was primarily a result of $851,000 in non-recurring credits received in 2012 from two of our
performance rights organizations for fees previously paid. Sales commission and selling expenses increased
$183,000 in 2013 as a result of increased local revenue. Programming salaries increased $443,000 as a result
of programming contractual agreements and health care cost increased $440,000 in 2013.

Operating income for the radio segment decreased $5,919,000 or 18% to $27,852,000 for the year ended
December 31, 2013, from $33,771,000 for the year ended December 31, 2012. The decrease was a primarily a
result of the decline in net operating revenue combined with the increase in station operating expense,
described above. Operating income for 2013 also includes a non-cash impairment charge of $2,033,000 in
connection with our review of broadcast licenses during the fourth quarter of 2013 (see Note 2 in the
accompanying notes to the consolidated ﬁnancial statements).

Television Segment

For the year ended December 31, 2013, net operating revenue of our television segment was $19,660,000

compared with $18,496,000 for the year ended December 31, 2012, an increase of $1,164,000 or 6%. Gross
local revenue, gross national revenue and gross retransmission consent revenue increased $1,392,000,
$869,000 and $438,000, respectively, from 2012. The increase in gross local revenue was primarily
attributable to improvements in our Victoria, TX market. The increase in gross national revenue is due to
increased advertising in our Joplin, MO market. Gross political revenue decreased $1,490,000 for the year
ended December 31, 2013 as compared to 2012. The decrease in gross political revenue was attributable to
reduced political advertising in 2013, as compared to 2012, which was an election year.

Station operating expense in the television segment for the year ended December 31, 2013 was

$13,044,000, compared with $12,296,000 for the year ended December 31, 2012, an increase of $748,000 or
6%. The increase in station operating expense was due to higher sales commissions and selling expenses of
$314,000 and increased retransmission fees of $155,000. These costs increases are a direct result of increased
revenue in 2013.

Operating income in the television segment for the year ended December 31, 2013 was $6,616,000
compared with $6,200,000 for the year ended December 31, 2012, an increase of $416,000 or 7%. The
increase was a result of the improvement in net operating revenue partially offset by an increase in station
operating expense, described in detail above.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Consolidated

For the year ended December 31, 2012, consolidated net operating revenue was $130,259,000 compared

with $125,273,000 for year ended December 31, 2011, an increase of $4,986,000 or 4%. Gross political
revenue and gross retransmission consent revenue increased $5,472,000 and $1,314,000, respectively, in 2012.
Gross local revenue increased $1,624,000 and gross national revenue decreased $3,204,000 compared to 2011.
The increase in gross local revenue was primarily attributable to improvements in our Charlottesville, VA,
Columbus, OH and Norfolk, VA markets, partially offset by a decline in gross local revenue in our
Milwaukee, WI market and our Networks. The increase in gross political revenue was a result of the 2012
election campaigns, and the increase in gross retransmission consent revenue was due to our renegotiated
contracts for the carriage rights of our television stations. The decrease in national revenue is due to a
reduction of national advertising in 2012.

Station operating expense was $90,288,000 for the year ended December 31, 2012, compared with
$90,929,000 for the year ended December 31, 2011, a decrease of $641,000 or less than 1%. Music licensing
fees decreased $1,771,000 in 2012 as a result of lower royalty rates and credits received from two of our
performance rights organizations for fees previously paid. We also had decreases during the year ended
December 31, 2012 of $494,000 in advertising and promotions expense, $377,000 in bad debt expense and
$236,000 in depreciation and amortization expense. The decrease in advertising and promotions was primarily
attributable to reductions in TV and billboard advertising, and the reduction in bad debt expense was a result
of enhanced collection efforts in many of our markets. These decreases in expenses were partially offset by an
increase in salaries of $1,728,000, as a result of the reinstatement of the 5% salary reductions implemented in
March 2009 and programming contractual agreement increases. Retransmission fees were $435,000, which
was a new expense in 2012 for our television stations. Retransmission fees are the amount that we pay our
network affiliates as a result of our renegotiated carriage rights agreements.

Operating income from continuing operations for the year ended December 31, 2012 was $32,011,000

compared to $26,754,000 for the year ended December 31, 2011, an increase of $5,257,000, or 20%. The
increase was a result of the improvement in net operating revenue and the reduction in station operating
expense described in detail above. Additionally, our corporate general and administrative charges increased
$370,000 in 2012. The increase in corporate general and administrative charges was primarily from an
increase in 401(k) expenses of $230,000 as a result of the reinstatement of Company contributions in 2012,
and a $100,000 increase in interactive expense to bring all of our websites in-house. The Company did not
make any matching contributions to the 401(k) plan in 2011.

The loss from discontinued operations was related to our Greenville, Mississippi TV station held for sale
and is presented net of income taxes. Please refer to Note 3 — Discontinued Operations, in the accompanying
notes to the consolidated ﬁnancial statements for more information on our discontinued operations.

We generated net income of $17,925,000 ($3.16 per share on a fully diluted basis) for the year ended
December 31, 2012, compared with $12,631,000 ($2.23 per share on a fully diluted basis) for the year ended
December 31, 2011, an increase of $5,294,000 or 42%. In 2012 we had an increase in operating income from
continuing operations of $5,257,000, as described above, and a decrease in interest expense of $1,687,000.
Additionally, in 2011 we recognized a charge of $1,326,000 for the write-off of unamortized debt issuance
costs related to our pre-existing credit facility. The decrease in interest expense was attributable to an average
decrease in market interest rates of 0.856%, a decrease in average debt outstanding, and a decrease in the
amortization of debt ﬁnancing costs. Income tax expense increased $3,335,000 in 2012 as a result of the
improvement in operating income and the decline in interest expense.

Radio Segment

For the year ended December 31, 2012, net operating revenue of the radio segment was $111,763,000
compared with $108,938,000 for the year ended December 31, 2011, an increase of $2,825,000 or 3%. Gross
local revenue and gross political revenue increased $1,829,000 and $3,769,000, respectively, in 2012. Gross
national revenue decreased $2,760,000 compared to 2011. The increase in gross local revenue was primarily
attributable to improvements in our Charlottesville, VA, Columbus, OH and Norfolk, VA markets, partially
offset by a decline in gross local revenue in our Milwaukee, WI market and our Networks. The increase in
gross political revenue was a result of the 2012 election campaigns. The decrease in national revenue is due to
a reduction of national advertising in 2012. National advertising on our Networks accounted for 23% of this
decrease.

Station operating expense for the radio segment was $77,992,000 for the year ended December 31, 2012,

compared with $79,130,000 for the year ended December 31, 2011, a decrease of $1,138,000 or 1%. Music
licensing fees decreased $1,756,000 in 2012 as a result of lower royalty rates and credits received from two of
our performance rights organizations for fees previously paid. We also had decreases during the year ended
December 31, 2012 of $449,000 in advertising and promotions expense and $343,000 in bad debt expense.
The decrease in advertising and promotions was primarily attributable to reductions in TV and billboard
advertising, and the reduction in bad debt expense was a result of enhanced collection efforts in many of our
markets. These decreases in expenses were partially offset by an increase in compensation expense of
$1,425,000, primarily as a result of the reinstatement of the 5% salary reductions implemented in March 2009
and programming contractual agreement increases.

Operating income for the radio segment increased $3,963,000 or 13% to $33,771,000 for the year ended

December 31, 2012, from $29,808,000 for the year ended December 31, 2011. The increase was a result of
the improvement in net operating revenue and reduction in station operating expense described above.

Television Segment

For the year ended December 31, 2012, net operating revenue of our television segment was $18,496,000

compared with $16,335,000 for the year ended December 31, 2011, an increase of $2,161,000 or 13%. Gross
political revenue and gross retransmission consent revenue increased $1,703,000 and $1,314,000, respectively,
in 2012. The increase in gross political revenue was attributable to the 2012 election campaigns, and the
increase in gross retransmission consent revenue was a result of our renegotiated contracts for the carriage
rights of our television stations. These increases were partially offset by decreases in gross national revenue
and gross local revenue of $444,000 and $205,000, respectively.

Station operating expense in the television segment for the year ended December 31, 2012 was

$12,296,000, compared with $11,799,000 for the year ended December 31, 2011, an increase of $497,000 or
4%. The increase in station operating expense was primarily retransmission fees of $435,000 in 2012, which
was a new expense in 2012 for our television stations. Retransmission fees are the amount that we pay our
network affiliates as a result of our renegotiated carriage rights agreements.

Operating income in the television segment for the year ended December 31, 2012 was $6,200,000

compared with $4,536,000 for the year ended December 31, 2011, an increase of $1,664,000 or 37%. The
increase was a result of the improvement in net operating revenue partially offset by an increase in station
operating expense, described in detail above.

Liquidity and Capital Resources

Debt Arrangements and Debt Service Requirements

Our credit facility, providing availability up to $120 million (the ‘‘Credit Facility’’) consists of a

$30 million term loan (the ‘‘Term Loan’’) and a $90 million revolving loan (the ‘‘Revolving Credit Facility’’)
and matures on May 31, 2018. An additional $40 million ﬁnancing may, in the future, be made available to
the Company subject to compliance with terms and conditions of the Credit Facility. On May 31, 2013, we
amended our Credit Facility to, among other things, change the allocation between the Term Loan and the
Revolving Credit Facility to $30 million and $90 million, respectively. This change in allocation was a
non-cash transaction resulting in an increase of $27,750,000 on the Revolving Credit Facility outstanding and
a decrease in the Term Loan outstanding of $27,750,000.

We had $75 million of unused borrowing capacity under the Revolving Credit Facility at December 31,

2013. The unused portion of the Revolving Credit Facility is available for general corporate purposes,
including working capital, capital expenditures, permitted acquisitions and related transaction expenses and
permitted stock buybacks.

The Credit Facility permits up to $35 million, annually, in aggregate amount for additional business
acquisitions and also permits the Company to pay dividends, distributions and stock redemptions, subject to
certain terms and conditions as set forth in the Credit Facility in further detail.

The Term Loan principal amortizes in equal installments of 5% of the Term Loan during each year,
however, upon satisfaction of certain conditions, as deﬁned in the Credit Facility, no amortization payment is
required. The Credit Facility is also subject to mandatory prepayment requirements, including but not limited
to, certain sales of assets, certain insurance proceeds, certain debt issuances and certain sales of equity.
Optional prepayments of the Credit Facility are permitted without any premium or penalty, other than certain
costs and expenses. As of December 31, 2013, we have no required amortization payment.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR plus

1.25% to 2.25% or the base rate plus 0.25% to 1.25%. The spread over LIBOR and the base rate vary from
time to time, depending upon our ﬁnancial leverage. We also pay quarterly commitment fees of 0.25% to
0.35% per annum on the unused portion of the Revolving Credit Facility.

We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in
support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged
substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit
Facility.

The Credit Facility contains a number of ﬁnancial covenants (all of which we were in compliance with at

December 31, 2013) which, among other things, require us to maintain speciﬁed ﬁnancial ratios and impose
certain limitations on us with respect to investments, additional indebtedness, dividends, distributions,
guarantees, liens and encumbrances.

In 2003, we entered into an agreement of understanding with Surtsey Media whereby we have guaranteed

up to $1,250,000 of the debt incurred in closing the acquisition of a construction permit for KFJX-TV station
in Pittsburg, Kansas, a full power Fox affiliate serving Joplin, Missouri. At December 31, 2013, there was
$1,078,000 of debt outstanding under this agreement. We do not have any recourse provision in connection
with our guarantee that would enable us to recover any amounts paid under the guarantee. As a result, at
December 31, 2013, we have recorded $1,078,000 in debt and $1,000,000 in intangible assets, primarily
broadcast licenses. In consideration for the guarantee, Surtsey Media entered into various agreements with us
relating to the stations. See Note 9 of the Notes to Consolidated Financial Statements included within this
Form 10-K, which is incorporated by reference.

Sources and Uses of Cash

During the years ended December 31, 2013, 2012 and 2011, we had net cash ﬂows from operating

activities of $26,712,000, $30,955,000 and $27,178,000, respectively. We believe that cash ﬂow from
operations will be sufficient to meet quarterly debt service requirements for interest and scheduled payments
of principal under the Credit Facility. However, if such cash ﬂow is not sufficient, we may be required to sell
additional equity securities, reﬁnance our obligations or dispose of one or more of our properties in order to
make such scheduled payments. There can be no assurance that we would be able to effect any such
transactions on favorable terms, if at all.

In March 2013, our board of directors authorized an increase to our Stock Buy-Back Program

(the ‘‘Buy-Back Program’’) to allow us to purchase up to $75.8 million of our Class A Common Stock. From
its inception in 1998 through December 31, 2013, we have repurchased 1.9 million shares of our Class A
Common Stock for $45.9 million. During the year ended December 31, 2013, approximately 2,000 shares
were retained for payment of withholding taxes for $95,000 related to the vesting of restricted stock.

Our capital expenditures, exclusive of acquisitions, for the year ended December 31, 2013 were

$5,152,000 ($4,809,000 in 2012). We anticipate capital expenditures in 2014 to be approximately $5.5 million,
which we expect to ﬁnance through funds generated from operations.

Summary Disclosures About Contractual Obligations

We have future cash obligations under various types of contracts, including the terms of our Credit
Facility, operating leases, programming contracts, employment agreements, and other operating contracts. The
following table reﬂects a summary of our contractual cash obligations and other commercial commitments as
of December 31, 2013:

Contractual Obligations:

Long-Term Debt Obligations(1)
Interest Payments on Long-Term

. . . . . .

Debt(2) . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Operating Leases
Purchase Obligations(3)
. . . . . . . . . . .
Other Long-Term Liabilities . . . . . . . .
Total Contractual Cash Obligations . . .

Payments Due By Period

Total

Less Than
1 Year

$46,078

$ 1,078

1 to 3 Years
(In thousands)
$ —

4 to 5 Years

More Than
5 Years

$45,000

$ —

3,846
8,722
23,000
—
$81,646

879
1,330
12,955
—
$16,242

1,739
2,063
7,350
—
$11,152

1,228
1,408
2,232
—
$49,868

—
3,921
463
—
$4,384

(1) Under our Credit Facility, the maturity on outstanding debt of $46.1 million could be accelerated if we

(2)

(3)

do not maintain certain covenants. Long-Term Debt Obligations include the guarantee of debt of a related
party of $1,078,000. (See Notes 4 and 9 of the Notes to Consolidated Financial Statements).
Interest payments on the long-term debt are based on scheduled debt maturities and the interest rates are
held constant over the remaining terms.
Includes $13,658,000 in obligations under employment agreements and contracts with on-air
personalities, other employees, and our President, CEO, and Chairman, Edward K. Christian and
$9,342,000 in purchase obligations under general operating agreements and contracts including but not
limited to syndicated programming contracts; sports programming rights; software rights; ratings services;
television advertising; and other operating expenses.

We anticipate that the above contractual cash obligations will be ﬁnanced through funds generated from

operations or additional borrowings under our Credit Facility, or a combination thereof.

Critical Accounting Policies and Estimates

Our consolidated ﬁnancial statements have been prepared in conformity with accounting principles
generally accepted in the United States, which require us to make estimates, judgments and assumptions that
affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures and
contingencies. We evaluate estimates used in preparation of our ﬁnancial statements on a continual basis,
including estimates related to the following:

Revenue Recognition: Revenue from the sale of commercial broadcast time to advertisers is
recognized when commercials are broadcast. Revenue is reported net of advertising agency commissions.
Agency commissions, when applicable, are based on a stated percentage applied to gross billing. All revenue
is recognized in accordance with the Securities and Exchange Commission’s (‘‘SEC’’) Staff Accounting
Bulletin (‘‘SAB’’) No. 104, Topic 13, Revenue Recognition Revised and Updated and the Accounting
Standards Codiﬁcation (ASC) Topic 605, Revenue Recognition.

Carrying Value of Accounts Receivable and Related Allowance for Doubtful Accounts: We evaluate
the collectability of our accounts receivable based on a combination of factors. In circumstances where we are
aware of a speciﬁc customer’s inability to meet its ﬁnancial obligations to us (e.g., bankruptcy ﬁlings, credit
history, etc.), we record a speciﬁc reserve for bad debts against amounts due to reduce the net recognized
receivable to the amount we reasonably believe will be collected. For all other customers, we recognize
reserves for bad debts based on past loss history and the length of time the receivables are past due, ranging

from 50% for amounts 90 days outstanding to 100% for amounts over 120 days outstanding. If our
evaluations of the collectability of our accounts receivable differ from actual results, additional bad debt
expense and allowances may be required. Our historical estimates have been a reliable method to estimate
future allowances and our reserves have averaged approximately 3% of our outstanding receivables. The effect
of an increase in our allowance of 1% of our outstanding receivables as of December 31, 2013, from 3.0% to
4.0% or from $578,000 to $762,000 would result in a decrease in net income of $111,000, net of taxes for the
year ended December 31, 2013.

Purchase Accounting: We account for our acquisitions under the purchase method of accounting. The

total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair
values as of the acquisition date. The excess of consideration paid over the estimated fair values of the net
assets acquired is recorded as goodwill. Determining the fair values of the net assets acquired and liabilities
assumed requires management’s judgment and often involves the use of signiﬁcant estimates including
assumptions with respect to future cash inﬂows and outﬂows, discount rates, asset lives and market multiples,
among other items.

Broadcast Licenses: As of December 31, 2013, we have recorded approximately $88,460,000 in
broadcast licenses, which represents 45.8% of our total assets. In assessing the recoverability of these assets,
we must conduct impairment testing and charge to operations an impairment expense only in the periods in
which the carrying value of these assets is more than their fair value. We perform an annual impairment test
on October 1 of each year.

During the fourth quarter of 2013, we recognized a $2,033,000 impairment charge for broadcast licenses

in certain of our radio markets primarily due to declines in available market revenue, market revenue share,
proﬁt margins, and estimated long-term growth rates, combined with an increase in technical equipment costs
in three of our markets, Asheville, North Carolina; Keene, New Hampshire/Brattleboro, Vermont; and
Mitchell, South Dakota. Please refer to Note 2 — Broadcast Licenses and Other Intangible Assets, in the
accompanying notes to the consolidated ﬁnancial statements for a discussion of several key assumptions used
in the fair value estimate of our broadcast licenses during our fourth quarter annual impairment test.

There was no impairment of broadcast licenses in 2012.

We believe our estimate of the value of our broadcast licenses is a critical accounting estimate as the

value is signiﬁcant in relation to our total assets, and our estimate of the value uses assumptions that
incorporate variables based on past experiences and judgments about future operating performance of our
stations. These variables include but are not limited to: (1) the forecast growth rate of each radio and
television market, including population, household income, retail sales and other expenditures that would
inﬂuence advertising expenditures; (2) market share and proﬁt margin of an average station within a market;
(3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate;
(5) the likely media competition within the market area; and (6) terminal values. Changes in our estimates of
the fair value of these assets could result in material future period write-downs in the carrying value of our
broadcast licenses. For illustrative purposes only, had the fair values of each of our broadcasting licenses been
lower by 10% as of December 31, 2013, the Company would have recorded an additional broadcast license
impairment of approximately $1.0 million; had the fair values of each of our broadcasting licenses been lower
by 20% as of December 31, 2013, the Company would have recorded an additional broadcast license
impairment of approximately $3.2 million; and had the fair value of our broadcasting licenses been lower by
30% as of December 31, 2013, the Company would have recorded an additional broadcast license impairment
of approximately $8.5 million.

Stock Based Compensation: We use a Black-Scholes valuation model to estimate the fair value of
stock option awards. Under the fair value method, stock based compensation cost is measured at the grant
date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting
period. Determining the fair value of share-based awards at grant date requires assumptions and judgments
about expected volatility and forfeiture rates, among other factors. If actual results differ signiﬁcantly from
these assumptions, then stock based compensation expense may differ materially in the future from that
previously recorded.

The fair value of restricted stock awards is determined based on the closing market price of the
Company’s Class A Common Stock on the grant date and is adjusted at each reporting date based on the
amount of shares ultimately expected to vest.

Litigation and Contingencies: On an ongoing basis, we evaluate our exposure related to litigation and

contingencies and record a liability when available information indicates that a liability is probable and
estimable. We also disclose signiﬁcant matters that are reasonably possible to result in a loss or are probable
but not estimable.

Market Risk and Risk Management Policies

Our earnings are affected by changes in short-term interest rates as a result of our long-term debt

arrangements. If market interest rates averaged 1% more in 2013 than they did during 2013, our interest
expense would increase, and income before taxes would decrease by $534,000. These amounts are determined
by considering the impact of the hypothetical interest rates on our borrowing cost. This analysis does not
consider the effects of the reduced level of overall economic activity that could exist in such an environment.
Further, in the event of a change of such magnitude, management would likely take actions to further mitigate
its exposure to the change. However, due to the uncertainty of the speciﬁc actions that would be taken and
their possible effects, the sensitivity analysis assumes no changes in our ﬁnancial structure.

Inﬂation

The impact of inﬂation on our 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 our operations.

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Presentation of Unrecognized Tax Beneﬁt When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exits, an amendment to
FASB ASC Topic 740, Income Taxes. This amendment requires the netting of unrecognized tax beneﬁts against
a deferred tax asset for a loss or other carryforward that would apply in the settlement of uncertain tax
positions. This guidance is effective for the Company beginning January 1, 2014 and is not expected to have a
material impact on our consolidated ﬁnancial statements.

In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability

Arrangements Which the Total Amount of the Obligation is Fixed at the Reporting Date, an amendment to
FASB ASC Topic 405, Liabilities. This update provides guidance on the recognition, measurement, and
disclosure of obligations resulting from joint and several liability arrangements, including debt arrangements,
other contractual obligations, and settled litigation and judicial rulings, for which the total amount of the
obligation is ﬁxed at the reporting date. The amendment is effective for the Company on January 1, 2014 and
is required to be applied retrospectively to all prior periods presented for those obligations that existed upon
adoption of the ASU. The Company does not expect that the adoption of these provisions will have a material
impact on our consolidated ﬁnancial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Information appearing under the caption ‘‘Market Risk and Risk Management Policies’’ in Item 7 is

hereby incorporated by reference.

Item 8. Financial Statements and Supplementary Data

The ﬁnancial statements attached hereto are ﬁled as part of this annual report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the

supervision and with the participation of the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the ‘‘Exchange
Act’’). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures over ﬁnancial reporting were effective to
ensure that material information required to be disclosed by the Company in the reports that it ﬁles or submits
under the Exchange Act to be recorded, processed, summarized and reported within the time periods speciﬁed
in the Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over ﬁnancial reporting during the quarter ended
December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal
controls over ﬁnancial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over ﬁnancial

reporting, as such term is deﬁned in Exchange Act Rule 13a-15(f). Under the supervision and with the
participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted
an evaluation of the effectiveness of our internal control over ﬁnancial reporting based on the framework as
set forth in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Based on our evaluation, management concluded that our internal control over ﬁnancial reporting was
effective as of December 31, 2013. Our internal control over ﬁnancial reporting as of December 31, 2013 has
been audited by Ernst & Young LLP, an independent registered public accounting ﬁrm, as stated in its report
which appears below.

Attestation Report of the Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Saga Communications, Inc.

We have audited Saga Communications, Inc.’s internal control over ﬁnancial reporting as of December 31,
2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria).
Saga Communications, Inc.’s management is responsible for maintaining effective internal control over
ﬁnancial reporting, and for its assessment of the effectiveness of internal control over ﬁnancial reporting
included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over ﬁnancial reporting based on our
audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over ﬁnancial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance
regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over ﬁnancial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial
statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Saga Communications, Inc. maintained, in all material respects, effective internal control over
ﬁnancial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Saga Communications, Inc., as of December 31, 2013 and
2012, and the related consolidated statements of income, stockholders’ equity, and cash ﬂows for each of the
three years in the period ended December 31, 2013 of Saga Communications Inc. and our report dated
March 17, 2014 expressed an unqualiﬁed opinion thereon.

/s/ Ernst & Young LLP
Detroit, Michigan
March 17, 2014

Item 9B. Other Information

None.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder
Matters

The information required by this item is incorporated by reference to the information contained in our
Proxy Statement for the 2014 Annual Meeting of Stockholders to be ﬁled not later than 120 days after the end
of the Company’s ﬁscal year. In addition, the information contained in the ‘‘Securities Authorized for Issuance
Under Equity Compensation Plan Information’’ subheading under Item 5 of this report is incorporated by
reference herein.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statements

PART IV

The following consolidated ﬁnancial statements attached hereto are ﬁled as part of this annual report:

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

— Consolidated Balance Sheets as of December 31, 2013 and 2012

— Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011

— Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012 and 2011

— Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Schedule II Valuation and qualifying accounts is disclosed in Note 1 to the Consolidated Financial
Statements attached hereto and ﬁled as part of this annual report. All other schedules for which provision are
made in the applicable accounting regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been omitted.

3. Exhibits

The Exhibits ﬁled in response to Item 601 of Regulation S-K are listed in the Exhibit Index, which is

incorporated herein by reference.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Saga Communications, Inc.

We have audited the accompanying consolidated balance sheets of Saga Communications, Inc.
(the ‘‘Company’’) as of December 31, 2013 and 2012, and the related consolidated statements of income,
stockholders’ equity and cash ﬂows for each of the three years in the period ended December 31, 2013. These
ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these ﬁnancial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the ﬁnancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An
audit also includes assessing the accounting principles used and signiﬁcant estimates made by management, as
well as evaluating the overall ﬁnancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the ﬁnancial statements referred to above present fairly, in all material respects, the
consolidated ﬁnancial position of Saga Communications, Inc. at December 31, 2013 and 2012, and the
consolidated results of its operations and its cash ﬂows for each of the three years in the period ended
December 31, 2013, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Saga Communications, Inc.’s internal control over ﬁnancial reporting as of December 31,
2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 17,
2014 expressed an unqualiﬁed opinion thereon.

/s/ Ernst & Young LLP
Detroit, Michigan
March 17, 2014

Saga Communications, Inc.

Consolidated Balance Sheets
(In thousands, except par value)

December 31,

2013

2012

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance of $578 ($577 in 2012) . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of station held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets
Net property and equipment

$ 17,628
19,815
2,350
1,263
1,025
—
42,081
56,337

$ 15,915
19,692
2,482
1,347
892
106
40,434
58,462

Other assets:

Broadcast licenses, net
Other intangibles, deferred costs and investments, net of accumulated

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

amortization of $12,205 ($11,984 in 2012)

. . . . . . . . . . . . . . . . . . . . . .
Assets of station held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses:

Payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of station held for sale . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broadcast program rights
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of station held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities

Commitments and contingencies
Stockholders’ equity:

Preferred stock, 1,500 shares authorized, none issued and outstanding . . . . .
Common stock:

Class A common stock, $.01 par value, 35,000 shares authorized, 6,409

issued (6,369 in 2012)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Class B common stock, $.01 par value, 3,500 shares authorized, 816

issued and outstanding (797 in 2012)

. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock (1,488 shares in 2013 and 1,491 in 2012, at cost) . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88,460

90,361

6,346
—
$193,224

5,286
2,787
$197,330

1,962

2,218

6,700
2,787
1,475
1,078
—
14,002
20,571
45,000
1,163
2,787
—
83,523

—

6,364
3,244
1,417
—
125
13,368
17,646
58,828
853
2,279
147
93,121

—

8
51,456
86,693
(28,520)
109,701
$193,224

8
51,061
81,746
(28,670)
104,209
$197,330

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Income

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating revenue
Station operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . .

Operating income from continuing operations

. . . . . . . . . . . . .

2011

2013

Years Ended December 31,
2012
(In thousands, except per share data)
$130,259
90,288
7,960
—
98,248
32,011

$125,273
90,929
7,590
—
98,519
26,754

$129,478
92,977
8,172
2,033
103,182
26,296

Other (income) expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off debt issuance costs . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Income from continuing operations before income tax . . . . . . . .

1,305
55
(106)
25,042

1,733
—
279
29,999

Income tax provision:

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from continuing operations, net of income tax . . . . . . . .
Income (loss) from discontinued operations, net of income tax . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per share

From continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
From discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

Weighted average common shares
Diluted earnings (loss) per share

From continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
From discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average common and common equivalent shares
. . . .
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . .

7,187
2,805
9,992
15,050
223
$ 15,273

2.62
.04
2.66
5,681

2.60
.04
2.64
5,745
1.80

7,399
4,540
11,939
18,060
(135)
$ 17,925

3.19
(.02)
3.17
5,659

3.18
(.02)
3.16
5,672
1.24

3,420
1,326
519
21,489

2,504
6,100
8,604
12,885
(254)
$ 12,631

2.28
(.04)
2.24
5,651

2.28
(.05)
2.23
5,656
—

See accompanying notes.

.
.

.
.
.
.
.
.

.
.
.
.
.
.
.

Class A .

.
.

stock awards .

Balance at January 1, 2011
.
Net income . . .
.
.
.
Conversion of shares from Class B to
.
.

.
.
.
Compensation expense related to restricted
.
.
.
.
.
.
Share-based compensation cost
.
.
Purchase of shares held in treasury .
Balance at December 31, 2011 .
.
.
.
.
.
.
.
.
Net income . . .
.
Net proceeds from exercised options
Dividends declared per common share
.
Compensation expense related to restricted
.
.
.
.
.
.
.

.
.
.
Share-based compensation cost
Purchase of shares held in treasury .
Balance at December 31, 2012 .
.
Net income . . .
.
.
.
Conversion of shares from Class B to
.
.
.

.
.
.
.
.
Issuance of restricted stock
.
.
Net proceeds from exercised options
Dividends declared per common share
.
Compensation expense related to restricted
.
.
.
.
.
.

.
.
Purchase of shares held in treasury .
.
401(k) plan contribution .
.
Balance at December 31, 2013 .
.

stock awards .

Class A .

.
.
.
.
.

.
.
.
.

.
.
.

.
.

.
.
.
.
.
.
.

.
.
.
.
.

.
.
.
.

.
.

.
.
.
.
.
.
.

.
.
.
.
.

.
.
.
.

Saga Communications, Inc.

Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2013, 2012 and 2011

Retained
Earnings

Treasury
Stock

Stockholders’
Equity

$ 80,078
12,631

—

187
196
(117)
$ 92,975
17,925
267
(7,010)

110
22
(80)
$104,209
15,273

—
—
275
(10,326)

135
(95)
230
$109,701

Class A
Common Stock

Class B
Common Stock

Amount

6,358

$64

798

Additional
Paid-In
Capital

(In thousands)
$50,279

(1)

187
196

6,359

$64

797

$50,662

267

110
22

6,369

$64

797

$51,061

$ 58,200
12,631

$(28,473)

(117)
$(28,590)

$ 70,831
17,925

(7,010)

(80)
$(28,670)

$ 81,746
15,273

1
30
9

(1)
20

6,409

$64

816

275

135

(10,326)

(15)
$51,456

$ 86,693

(95)
245
$(28,520)

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Cash Flows

Cash ﬂows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of tax . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . .

$ 15,273
223
15,050

$ 17,925
(135)
18,060

$ 12,631
(254)
12,885

2013

Years Ended December 31,
2012
(In thousands)

2011

Adjustments to reconcile net income to net cash provided by

operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets . . . . . . . . . . . . . . . . . . . .
Broadcast program rights amortization . . . . . . . . . . . . . . .
Amortization of deferred costs
. . . . . . . . . . . . . . . . . . . .
Compensation expense related to restricted stock awards . . .
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . .
Other (gains) losses, net . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . .
Barter revenue, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred and other compensation . . . . . . . . . . . . . . . . . . .
Write-off of debt issuance costs . . . . . . . . . . . . . . . . . . . .
Income tax beneﬁt on exercise of options . . . . . . . . . . . . .

Changes in assets and liabilities:

Decrease (increase) in receivables and prepaid expenses . .
Payments for broadcast program rights . . . . . . . . . . . . .
(Decrease) increase in accounts payable, accrued

expenses, and other liabilities . . . . . . . . . . . . . . . . . .
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by continuing operating activities . . . . . . . . .
Net cash provided by discontinued operating activities
. . . . . . .
. . . . . . . . . . . . . . . .
Net cash provided by operating activities

Cash ﬂows from investing activities:

. . . . . . . . . . . . . . . .
Acquisition of property and equipment
Proceeds from sale and disposal of assets . . . . . . . . . . . . . . .
Proceeds from sale of television station . . . . . . . . . . . . . . . .
Proceeds from sale of short-term investments . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in continuing investing activities . . . . . . . . . . . .
Net cash used in discontinued investing activities . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . .

Cash ﬂows from ﬁnancing activities:

Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Payments for debt issuance costs
Proceeds from long-term debt
. . . . . . . . . . . . . . . . . . . . . .
Other ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in ﬁnancing activities . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . .
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . .
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . .

6,768
2,805
2,033
637
204
135
(126)
20
—
(11)
19
55
(13)

160
(628)

(396)
11,662
26,712
—
26,712

(5,152)
792
2,960
—
(410)
(1,810)
—
(1,810)

6,858
4,540
—
614
231
110
221
59
22
(294)
3
—
—

(742)
(626)

1,850
12,846
30,906
49
30,955

(4,809)
42
—
—
(157)
(4,924)
(34)
(4,958)

7,101
6,100
—
637
642
187
626
(109)
196
(231)
38
1,326
—

(365)
(630)

(1,387)
14,131
27,016
162
27,178

(5,410)
521
—
1,018
(90)
(3,961)
(157)
(4,118)

(12,750)
(10,326)
(289)
—
176
(23,189)
1,713
15,915
$ 17,628

(10,250)
(7,010)
—
—
187
(17,073)
8,924
6,991
$ 15,915

(119,100)
—
(1,149)
92,100
(117)
(28,266)
(5,206)
12,197
6,991

See accompanying notes.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies

Nature of Business

Saga Communications, Inc. is a broadcasting company whose business is devoted to acquiring,

developing and operating broadcast properties. As of December 31, 2013 we owned or operated ninety-one
radio stations, four television stations, four low-power television stations and ﬁve radio information networks
serving twenty-ﬁve markets throughout the United States.

Basis of Presentation

On January 16, 2013 the Company consummated a four-for-three stock split of its Class A and Class B
Common Stock, to shareholders of record as of the close of business on December 28, 2012. The stock split
increased the Company’s issued and outstanding shares of common stock from 3,659,753 shares of Class A
Common Stock and 597,504 shares of Class B Common Stock to 4,879,186 and 796,672 shares, respectively.

All share and per share information in the accompanying ﬁnancial statements for periods prior to the split

have been restated retroactively to reﬂect the stock split. The common stock and additional paid-in capital
accounts at December 31, 2012 reﬂect the retroactive capitalization of the four-for-three stock split.

Principles of Consolidation

The consolidated ﬁnancial statements include the accounts of Saga Communications, Inc. and our
wholly-owned subsidiaries. All signiﬁcant intercompany balances and transactions have been eliminated in
consolidation.

Use of Estimates

The preparation of the ﬁnancial statements in conformity with accounting principles generally accepted in

the United States (GAAP) requires us to make estimates and assumptions that affect the amounts reported in
the ﬁnancial statements and accompanying notes. While we do not believe that the ultimate settlement of any
amounts reported will materially affect our ﬁnancial position or results of future operations, actual results may
differ from estimates provided.

Concentration of Risk

Our top six markets when combined represented 44%, 44% and 43% of our net operating revenue for the

years ended December 31, 2013, 2012 and 2011, respectively.

We sell advertising to local and national companies throughout the United States. We perform ongoing

credit evaluations of our customers and generally do not require collateral. We maintain an allowance for
doubtful accounts at a level which we believe is sufficient to cover potential credit losses.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and time deposits with original maturities of three

months or less. We did not have any time deposits at December 31, 2013 and 2012.

Financial Instruments

Our ﬁnancial instruments are comprised of cash and cash equivalents, accounts receivable, accounts

payable and long-term debt. The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to their short maturities. The carrying value of long-term debt
approximates fair value as it carries interest rates that either ﬂuctuate with the euro-dollar rate, prime rate or
have been reset at the prevailing market rate at December 31, 2013.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

Allowance for Doubtful Accounts

A provision for doubtful accounts is recorded based on our judgment of the collectability of receivables.

Amounts are written off when determined to be fully uncollectible. Delinquent accounts are based on
contractual terms. The activity in the allowance for doubtful accounts during the years ended December 31,
2013, 2012 and 2011 was as follows:

Year Ended

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Write Off of
Uncollectible
Accounts, Net of
Recoveries

Balance at
End of Period

(In thousands)

December 31, 2013 . . . . . . . . . . . . . . . . . . .
December 31, 2012 . . . . . . . . . . . . . . . . . . .
December 31, 2011 . . . . . . . . . . . . . . . . . . .

$577
$794
$797

$293
$134
$526

$(292)
$(351)
$(529)

$578
$577
$794

Barter Transactions

Our radio and television stations trade air time for goods and services used principally for promotional,
sales and other business activities. An asset and a liability are recorded at the fair market value of goods or
services received. Barter revenue is recorded when commercials are broadcast, and barter expense is recorded
when goods or services are received or used.

Property and Equipment

Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed as
incurred. When property and equipment is sold or otherwise disposed of, the related cost and accumulated
depreciation is removed from the respective accounts and the gain or loss realized on disposition is reﬂected
in earnings. Depreciation is provided using the straight-line method based on the estimated useful life of the
assets. We review our property and equipment for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by
comparison of their carrying amounts to future undiscounted cash ﬂows the assets are expected to generate. If
the assets are considered to be impaired, the impairment to be recognized equals the amount by which the
carrying value of the assets exceeds its fair market value. We did not record any impairment of property and
equipment during 2013, 2012 and 2011.

Property and equipment consisted of the following:

Land and land improvements
. . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Towers and antennae . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment
Furniture, ﬁxtures and leasehold improvements
. . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated depreciation . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Net property and equipment

Estimated
Useful Life

December 31,

2013

2012

(In thousands)

31.5 years
7 − 15 years
3 − 15 years
7 − 20 years
5 years

— $ 10,984
32,378
25,761
77,908
7,926
3,805
158,762
(102,425)
$ 56,337

$ 11,321
32,367
25,687
74,874
7,768
3,762
155,779
(97,317)
$ 58,462

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $6,716,000,

$6,805,000 and $7,053,000, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

Intangible Assets

Intangible assets deemed to have indeﬁnite useful lives, which include broadcast licenses, are not
amortized and are subject to impairment tests which are conducted as of October 1 of each year, or more
frequently if impairment indicators arise.

We have 98 broadcast licenses serving 25 markets, some of which are currently under renewal, while
others require renewal over the period of 2014-2022. In determining that the Company’s broadcast licenses
qualiﬁed as indeﬁnite-lived intangible assets, management considered a variety of factors including our
broadcast licenses may be renewed indeﬁnitely at little cost; our broadcast licenses are essential to our
business and we intend to renew our licenses indeﬁnitely; we have never been denied the renewal of an FCC
broadcast license nor do we believe that there will be any compelling challenge to the renewal of our
broadcast licenses; and we do not believe that the technology used in broadcasting will be replaced by another
technology in the foreseeable future.

Separable intangible assets that have ﬁnite lives are amortized over their useful lives using the

straight-line method. Favorable lease agreements are amortized over the leases ranging from 4 to 26 years.
Other intangibles are amortized over one to eleven years.

Deferred Costs

The costs related to the issuance of debt are capitalized and amortized to interest expense over the life of

the debt. During the years ended December 31, 2013, 2012 and 2011, we recognized interest expense related
to the amortization of debt issuance costs of $204,000, $231,000 and $642,000, respectively. In 2013 we also
wrote-off unamortized debt issuance costs of $55,000, pre-tax, in connection with an amendment to our credit
facility. During 2011 we wrote-off unamortized debt issuance costs of $1,326,000, pre-tax, in connection with
the reﬁnancing of our bank debt, included in Long-term obligations. See Note 4 — Long-Term Debt.

At December 31, 2013 and 2012, the net book value of deferred costs was $823,000 and $793,000,
respectively, and was presented in Other intangibles, deferred costs and investments in our Consolidated
Balance Sheets.

Broadcast Program Rights

We record the capitalized costs of broadcast program rights when the license period begins and the
programs are available for use. Amortization of the program rights is recorded using the straight-line method
over the license period or based on the number of showings. Amortization of broadcast program rights is
included in station operating expense. Unamortized broadcast program rights are classiﬁed as current or
non-current based on terms of the syndication agreements and estimated usage in future years.

Treasury Stock

In March 2013, our board of directors authorized an increase in the amount committed to our Stock

Buy-Back Program (the ‘‘Buy-Back Program’’) from $60 million to $75.8 million. The Buy-Back Program
allows us to repurchase our Class A Common Stock. As of December 31, 2013, we had remaining
authorization of $29.9 million for future repurchases of our Class A Common Stock.

Repurchases of shares of our Common Stock are recorded as Treasury stock and result in a reduction of

Stockholders’ equity. During 2013, 2012 and 2011, we acquired 2,179 shares at an average price of $43.98 per
share, 2,924 shares at an average price of $27.30 per share and 5,380 shares at an average price of $21.71 per
share, respectively.

Revenue Recognition

Revenue from the sale of commercial broadcast time to advertisers is recognized when commercials are
broadcast. Revenue is reported net of advertising agency commissions. Agency commissions, when applicable

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

are based on a stated percentage applied to gross billing. All revenue is recognized in accordance with the
Securities and Exchange Commission’s (‘‘SEC’’) Staff Accounting Bulletin (‘‘SAB’’) No. 104, Topic 13,
Revenue Recognition Revised and Updated and The Accounting Standards Codiﬁcation (ASC) Topic 605,
Revenue Recognition.

Time Brokerage Agreements/Local Marketing Agreements

We have entered into Time Brokerage Agreements (‘‘TBA’s’’) or Local Marketing Agreements

(‘‘LMA’s’’) in certain markets. In a typical TBA/LMA, the FCC licensee of a station makes available, for a
fee, blocks of air time on its station to another party that supplies programming to be broadcast during that air
time and sells its own commercial advertising announcements during the time periods speciﬁed. Revenue and
expenses related to TBA’s/LMA’s are included in the accompanying Consolidated Statements of Income.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. Such costs amounted to $3,225,000,

$3,182,000 and $3,675,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Income Taxes

Deferred tax assets and liabilities are determined based on temporary differences between the ﬁnancial

reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.

Dividends

On October 2, 2012 the Company’s Board of Directors declared a special cash dividend of $1.24 per

share on its Classes A and B Common Stock. This dividend totaling $7.0 million was paid on December 3,
2012 to shareholders of record on November 15, 2012.

No dividends were declared by the Company in 2011.

Stock-Based Compensation

Stock-based compensation cost for stock option awards is estimated on the date of grant using a
Black-Scholes valuation model and is expensed on a straight-line method over the vesting period of the
options. Stock-based compensation expense is recognized net of estimated forfeitures. The fair value of
restricted stock awards is determined based on the closing market price of the Company’s Class A Common
Stock on the grant date and is adjusted at each reporting date based on the amount of shares ultimately
expected to vest. See Note 7 — Stock-Based Compensation for further details regarding the expense calculated
under the fair value based method.

Earnings Per Share

Earnings per share is calculated using the two-class method. The two-class method is an earnings
allocation formula that determines earnings per share for each class of common stock and participating
security. The Company has participating securities related to restricted stock units, granted under the
Company’s Second Amended and Restated 2005 Incentive Compensation Plan, that earn dividends on an
equal basis with common shares. In applying the two-class method, earnings are allocated to both common
shares and participating securities.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

The following table sets forth the computation of basic and diluted earnings per share:

Years Ended December 31,

2013

2011
(In thousands, except per share data)

2012

Numerator:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income allocated to unvested participating

$15,273

$17,925

$12,631

securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available to common stockholders . . . . . . . . . . .

135
$15,138

—
$17,925

—
$12,631

Denominator:

Denominator for basic earnings per share-weighted average

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,681

5,659

5,651

Effect of dilutive securities:
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per share − adjusted

weighted-average shares and assumed conversions . . . . . .
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . .

5,745
2.66
2.64

$
$

5,672
3.17
3.16

$
$

5,656
2.24
2.23

$
$

Potentially dilutive common shares consist of employee stock options. Employee stock options to
purchase approximately 13,000, 93,000 and 304,000 shares of our stock were outstanding at December 31,
2013, 2012 and 2011, respectively, but were not included in the computation of diluted earnings per share
because the effect would have been antidilutive as the options’ exercise prices exceeded the average market
price. The actual effect of these shares, if any, on the diluted earnings per share calculation will vary
signiﬁcantly depending on ﬂuctuations in the stock price.

Recent Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability

Saga Communications, Inc.

Notes to Consolidated Financial Statements

2. Broadcast Licenses and Other Intangible Assets

Broadcast Licenses

We evaluate our FCC licenses for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. FCC licenses are evaluated for impairment at the
market level using a direct method. If the carrying amount of FCC licenses is greater than their estimated fair
value in a given market, the carrying amount of FCC licenses in that market is reduced to its estimated fair
value.

We operate our broadcast licenses in each market as a single asset and determine the fair value by
relying on a discounted cash ﬂow approach assuming a start-up scenario in which the only assets held by an
investor are broadcast licenses. The fair value calculation contains assumptions incorporating variables that are
based on past experiences and judgments about future operating performance using industry normalized
information for an average station within a market. These variables include, but are not limited to: (1) the
forecasted growth rate of each radio or television market, including population, household income, retail sales
and other expenditures that would inﬂuence advertising expenditures; (2) the estimated available advertising
revenue within the market and the related market share and proﬁt margin of an average station within a
market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted
discount rate; (5) the likely media competition within the market area; and (6) terminal values.

We have recorded the changes to broadcast licenses for the years ended December 31, 2013 and 2012 as

follows:

Balance at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . .

2013 Impairment Test

Radio

$80,768
5
$80,773
132
(2,033)
$78,872

Television
(In thousands)
$9,588
—
$9,588
—
—
$9,588

Total

$90,356
5
$90,361
132
(2,033)
$88,460

We completed our annual impairment test of broadcast licenses during the fourth quarter of 2013
and determined that the fair value of the broadcast licenses were less than the amount reﬂected in the
balance sheet for three of the Company’s radio markets, Asheville, North Carolina; Keene, New
Hampshire/Brattleboro, Vermont; and Mitchell, South Dakota, and recorded non-cash impairment charge of
$2,033,000 to reduce the carrying value of these assets to the estimated fair market value. The reasons for the
impairment to the broadcasting licenses recognized in the fourth quarter of 2013 were primarily due to
declines in available market revenue, market revenue share, proﬁt margins, and estimated long-term growth
rates, combined with an increase in technical equipment costs in three of our markets.

The following table reﬂects certain key estimates and assumptions used in the impairment test in the
fourth quarter of 2013. The ranges for operating proﬁt margin and market long-term revenue growth rates vary
based on our speciﬁc markets. In general, when comparing between 2013 and 2012: (1) the market speciﬁc
operating proﬁt margin range remained relatively consistent; (2) the market long-term revenue growth rates
were relatively consistent; (3) the discount rate remained relatively consistent; and (4) current year revenues
were 2.3% lower than previously projected for 2013.

Discount rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating proﬁt margin ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market long-term revenue growth rates . . . . . . . . . . . . . . . . . . . . . .

Fourth Quarter
2013
12.2% − 12.4%
19.9% − 35.8%
1.9% − 3.3%

Fourth Quarter
2012
12.0% − 12.2%
17.4% − 35.8%
1.75% − 3.1%

Saga Communications, Inc.

Notes to Consolidated Financial Statements

2. Broadcast Licenses and Other Intangible Assets − (continued)

If actual market conditions are less favorable than those estimated by us or if events occur or

circumstances change that would reduce the fair value of our broadcast licenses below the carrying value, we
may be required to recognize additional impairment charges in future periods. Such a charge could have a
material effect on our consolidated ﬁnancial statements.

2012 Impairment Test

During the fourth quarter of 2012, we completed our annual impairment test of broadcast licenses and

determined that the fair value of the broadcast licenses was greater than the carrying value recorded for each
of our markets and, accordingly, no impairment was recorded.

2011 Impairment Test

During the fourth quarter of 2011, we completed our annual impairment test of broadcast licenses and

determined that the fair value of the broadcast licenses was greater than the carrying value recorded for each
of our markets and, accordingly, no impairment was recorded.

Other Intangible Assets

We evaluate amortizable intangible assets for recoverability when circumstances indicate impairment may

have occurred, using an undiscounted cash ﬂow methodology. If the future undiscounted cash ﬂows for the
intangible asset are less than net book value, then the net book value is reduced to the estimated fair value.
Amortizable intangible assets are included in Other intangibles, deferred costs and investments in the
Consolidated Balance Sheets.

We have recorded amortizable intangible assets at December 31, 2013 as follows:

Non-competition agreements
. . . . . . . . . . . . . . . . . .
Favorable lease agreements . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Total amortizable intangible assets

Gross
Carrying
Amount

$ 4,511
5,862
1,741
$12,114

Accumulated
Amortization
(In thousands)
$ 4,511
5,577
1,592
$11,680

We have recorded amortizable intangible assets at December 31, 2012 as follows:

Gross
Carrying
Amount

$ 4,511
5,862
1,731
$12,104

Accumulated
Amortization
(In thousands)
$ 4,511
5,540
1,577
$11,628

Net
Amount

$ —
285
149
$434

Net
Amount

$ —
322
154
$476

Aggregate amortization expense for these intangible assets for the years ended December 31, 2013, 2012
and 2011, was $52,000, $51,000 and $50,000, respectively. Our estimated annual amortization expense for the
years ending December 31, 2014, 2015, 2016, 2017 and 2018 is $52,000, $38,000, $38,000, $38,000 and
$38,000, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

3. Discontinued Operations

On April 3, 2012 we entered into a deﬁnitive agreement to sell our Greenville, Mississippi TV station

(‘‘WXVT’’) for $3 million, subject to certain adjustments, to H3 Communications, LLC (‘‘H3’’). This
transaction was completed on January 31, 2013 and we recognized a gain of approximately $223,000, net of
tax, on the sale of WXVT during the ﬁrst quarter of 2013, included within income from discontinued
operations.

In accordance with authoritative guidance we have reported the results of operations of WXVT as
discontinued operations in the accompanying consolidated ﬁnancial statements. For all previously reported
periods, certain amounts in the consolidated ﬁnancial statements have been reclassiﬁed. The assets and
liabilities of WXVT have been classiﬁed as held for sale and the net results of operations have been
reclassiﬁed from continuing operations to discontinued operations. WXVT was previously included in the
Company’s television segment.

4. Long-Term Debt

Long-term debt consisted of the following:

Credit Agreement:

Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured debt of affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts payable within one year . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2013

2012

(In thousands)

$30,000
15,000
1,078
46,078
1,078
$45,000

$57,750
—
1,078
58,828
—
$58,828

Future maturities of long-term debt are as follows:

Year Ending December 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(In thousands)
$ 1,078
—
—
—
45,000
—
$46,078

On May 31, 2013, we amended our $120 million credit facility (the ‘‘Credit Facility’’) to (i) extend the
maturity date to May 31, 2018; (ii) change the allocation between the term loan (the ‘‘Term Loan’’) and the
revolving loan (the ‘‘Revolving Credit Facility’’) to $30 million and $90 million, respectively; (iii) modify the
Consolidated Fixed Charge Coverage ratio to exclude distributions up to $20 million made when the
Consolidated Leverage Ratio is less than 2.50 to 1.00 from the ﬁxed charge component of such ratio;
(iv) revise the interest rates and commitment fees, as set forth below; (v) remove the cap on additional
business acquisitions if the Consolidated Leverage Ratio is less than 2.50 to 1.00, and if equal to or greater
than such amount, cap such acquisitions at $35 million subject to certain conditions; and (vi) remove the cap
on the annual aggregate of dividends, distributions, and stock redemptions if the Consolidated Leverage Ratio
is less than 2.50 to 1.00, and if equal to or greater than such amount, such annual aggregate amount becomes
subject to a pro forma covenant compliance.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

4. Long-Term Debt − (continued)

We had $75 million of unused borrowing capacity under the Revolving Credit Facility at December 31,

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR

(0.1690% at December 31, 2013) plus 1.25% to 2.25% (0.2117% at December 31, 2012, plus 1.50% to
2.75%) or the base rate plus 0.25% to 1.25% (0.50% to 1.75% at December 31, 2012). The spread over
LIBOR and the base rate vary from time to time, depending upon our ﬁnancial leverage. We also pay
quarterly commitment fees of 0.25% to 0.35% per annum (0.25% to 0.375% per annum at December 31,
2012) on the unused portion of the Revolving Credit Facility.

The Credit Facility contains a number of ﬁnancial covenants (all of which we were in compliance with at

5. Supplemental Cash Flow Information

2013

Years Ended December 31,
2012
(In thousands)

2011

Cash paid during the period for:

Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,103
$7,134

Non-cash transactions:

Barter revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
Barter expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property and equipment . . . . . . . . . .

$3,855
$3,844
$ 104

$1,559
$6,999

$4,188
$3,894
99
$

$2,788
$3,202

$4,369
$4,138
$ 286

On May 31, 2013, we amended our Credit Facility to, among other things, change the allocation between
the Term Loan and the Revolving Credit Facility to $30 million and $90 million, respectively. This change in
allocation was a non-cash transaction resulting in an increase of $27,750,000 on the Revolving Credit Facility
outstanding and a decrease in the Term Loan outstanding of $27,750,000.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes

Deferred income taxes reﬂect the net tax effects of temporary differences between the carrying amounts

of assets and liabilities for ﬁnancial reporting purposes and the amounts used for income tax purposes.
Signiﬁcant components of the Company’s deferred tax liabilities and assets are as follows:

December 31,

2013

2012

(In thousands)

Deferred tax liabilities:

Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,235
14,425
601
23,261

Deferred tax assets:

Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . .
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred tax assets
. . . . . . . . . . . . . . . . . . . . . .
Non-current portion of deferred tax liabilities . . . . . . . . . . . . . . . . .
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

232
3,355
128
7
3,722
7
3,715
$ 19,546
$ 1,025
(20,571)
$(19,546)

$ 9,205
10,437
616
20,258

233
3,195
76
58
3,562
58
3,504
$ 16,754
$
892
(17,646)
$(16,754)

At December 31, 2013, we have state and local tax loss carry forwards of approximately $162,000,
which will expire in 2023. During 2013, we utilized approximately $790,000 in state and local tax loss carry
forwards, approximately $381,000 in state and local tax loss carry forwards expired and accordingly, the
valuation allowances decreased by $51,000. At December 31, 2013, the valuation allowance for net deferred
tax assets relates to state loss carry forwards. Deferred tax assets are required to be reduced by a valuation
allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

At December 31, 2013 and 2012, net deferred tax liabilities include a deferred tax asset of $2,089,000
and $1,199,000, respectively, relating to deferred compensation and stock-based compensation expense. Full
realization of the tax asset related to stock based compensation requires stock options to be exercised at a
price equaling or exceeding the sum of the grant price plus the fair value of the option at the grant date and
restricted stock to vest at a price equaling or exceeding the fair market value at the grant date. Accounting
guidance, however, does not allow a valuation allowance to be recorded unless the company’s future taxable
income is expected to be insufficient to recover the asset. Accordingly, there can be no assurance that the price
of the Company’s common stock will increase to levels sufficient to realize the entire tax beneﬁt currently
reﬂected in the balance sheets at December 31, 2013 and 2012. See Note 7 — Stock-Based Compensation for
further discussion of stock-based compensation expense.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes − (continued)

The signiﬁcant components of the provision for income taxes are as follows:

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxes are allocated as follows:

Continuing operations . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Discontinued operations

2013

Years Ended December 31,
2012
(In thousands)

2011

$ 6,210
1,125
7,335
2,805
$10,140

$ 9,992
148
$10,140

$ 6,160
1,150
7,310
4,540
$11,850

$11,939
(89)
$11,850

$1,820
510
2,330
6,100
$8,430

$8,604
(174)
$8,430

In addition, we recognized a tax beneﬁt of $9,200 and tax expense of $25,000 and $0 as a result of stock

option exercises for the difference between compensation expense for ﬁnancial statement and income tax
purposes for the years ended December 31, 2013, 2012 and 2011, respectively.

The reconciliation of income tax at the U.S. federal statutory tax rates to income tax expense (beneﬁt) is

as follows:

Tax expense at U.S. statutory rates . . . . . . . . . . . . . . .
State tax expense, net of federal beneﬁt
. . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance on loss carry forwards . .

Discontinued operations . . . . . . . . . . . . . . . . . . . . . .

2013

Years Ended December 31,
2012
(In thousands)
$10,486
1,356
42
(34)
$11,850
89
$11,939

2011

$7,260
1,116
69
(15)
$8,430
174
$8,604

$ 8,894
1,192
105
(51)
$10,140
148
$ 9,992

The Company ﬁles income taxes in the U.S. federal jurisdiction, and in various state and local

jurisdictions. The Company is no longer subject to U.S. federal examinations by the Internal Revenue Service
(IRS) for years prior to 2008. During the ﬁrst quarter of 2012, the IRS commenced an examination of the
Company’s 2010 U.S. federal income tax return which was completed in the third quarter of 2012 and
resulted in no changes to the return. The Company is subject to examination for income and non-income tax
ﬁlings in various states.

Included in the balance sheet at December 31, 2012 are tax accruals of approximately $16,000 for

uncertain tax positions. Recognition of any of the related unrecognized tax beneﬁts would affect the
Company’s effective tax rate. As of December 31, 2013 there were no accrued balances recorded related to
uncertain tax positions.

We classify income tax-related interest and penalties as interest expense and corporate general and
administrative expense, respectively. For the years ended December 31, 2013 and 2012, we had no tax-related
interest or penalties and had $0 accrued at December 31, 2013 and 2012.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes − (continued)

In March 2012, the Compensation Committee recommended, and the Board approved, a $350,000
discretionary bonus to the CEO for the year ended December 31, 2011. As a result of the CEO’s total gross
compensation, approximately $177,000 was nondeductible pursuant to Section 162(m) of the Internal Revenue
Code of 1986, as amended.

7. Stock-Based Compensation

2005 Incentive Compensation Plan

On October 16, 2013 our stockholders approved the Second Amended and Restated Saga

Communications, Inc. 2005 Incentive Compensation Plan (the ‘‘Second Restated 2005 Plan’’). The 2005
Incentive Compensation Plan was ﬁrst approved by stockholders in 2005 and replaced our 2003 Stock Option
Plan (the ‘‘2003 Plan’’). The 2005 Incentive Compensation Plan was re-approved by stockholders in 2010 (the
‘‘Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan’’). The changes in the
Second Restated 2005 Plan (i) increases the number of authorized shares by 233,334 shares of Common
Stock, (ii) extends the date for making awards to September 6, 2018, (iii) includes directors as participants,
(iv) targets awards according to groupings of participants based on ranges of base salary of employees and/or
retainers of directors, (v) requires participants to retain 50% of their net annual restricted stock awards during
their employment or service as a director, and (vi) includes a clawback provision. The Second Restated 2005
plan allows for the granting of restricted stock, restricted stock units, incentive stock options, nonqualiﬁed
stock options, and performance awards to eligible employees and non-employee directors.

The number of shares of Common Stock that may be issued under the Second Restated 2005 Plan may

not exceed 280,000 shares of Class B Common Stock, 900,000 shares of Class A Common Stock of which up
to 620,000 shares of Class A Common Stock may be issued pursuant to incentive stock options and 280,000
Class A Common Stock issuable upon conversion of Class B Common Stock. Awards denominated in Class A
Common Stock may be granted to any employee or director under the Second Restated 2005 Plan. However,
awards denominated in Class B Common Stock may only be granted to Edward K. Christian, President, Chief
Executive Officer, Chairman of the Board of Directors, and the holder of 100% of the outstanding Class B
Common Stock of the Company. Stock options granted under the Second Restated 2005 Plan may be for
terms not exceeding ten years from the date of grant and may not be exercised at a price which is less than
100% of the fair market value of shares at the date of grant.

Stock-Based Compensation

The Company’s stock-based compensation expense is measured and recognized for all stock-based
awards to employees using the estimated fair value of the award. Compensation expense is recognized over
the period during which an employee is required to provide service in exchange for the award. For these
awards, we have recognized compensation expense using a straight-line amortization method. Accounting
guidance requires that stock-based compensation expense be based on awards that are ultimately expected to
vest; therefore stock-based compensation has been adjusted for estimated forfeitures. When estimating
forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. For the
years ended December 31, 2012 and 2011, we had $22,000 and $196,000, respectively, of total compensation
expense related to stock options. This expense is included in corporate general and administrative expense
in our results of operations. The associated future income tax beneﬁt recognized for the years ended
December 31, 2012 and 2011 was $9,000 and $80,000, respectively. The stock options were fully expensed at
December 31, 2012, therefore there was no compensation expense related to stock options for the year ended
December 31, 2013.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Stock-Based Compensation − (continued)

We calculated the fair value of each option award on the date of grant using the Black-Scholes option
pricing model. The estimated expected volatility, expected term of options and estimated annual forfeiture rate
were determined based on historical experience of similar awards, giving consideration to the contractual
terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The
risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant.

The following summarizes the stock option transactions for the Second Restated 2005 Plan, the 2003

Plan and the 1992 Stock Option Plan (the ‘‘1992 Plan’’) for the year ended December 31:

Outstanding at January 1, 2011 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2011 . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2013 . . . . . . . . . . .
Vested and Exercisable at December 31, 2013 . . .

Number of
Options
391,948
—
—
(88,316)
303,632

—
(9,796)
(33,176)
260,660

—
(8,910)
(17,963)
233,787
233,787

Weighted
Average
Exercise
Price
$38.78
—
—
43.50
$37.40

—
27.26
61.69
$34.69

—
29.41
54.35
$33.38
$33.38

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic Value

3.6

$ 135,886

3.0

$1,253,039

2.1
2.1

$4,058,035
$4,058,035

The total intrinsic value of stock options exercised during the years ended December 31, 2013 and 2012
was $155,500 and $72,200, respectively. Cash received from stock options exercised during the years ended
December 31, 2013 and 2012 was $311,500 and $287,600, respectively. No options were exercised during the
year ended December 31, 2011.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Stock-Based Compensation − (continued)

The following summarizes the non-vested stock option transactions for the Second Restated 2005 Plan,

the 2003 Plan and 1992 Plan for the year ended December 31:

Non-vested at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . .

There were no options granted during 2013.

Number of
Options
46,873
—
(37,150)
(440)
9,283
—
(9,283)
—
—

Weighted Average
Grant Date
Fair Value
$13.88
—
13.73
14.48
$14.48
—
14.48
—
$ —

The following summarizes the restricted stock transactions for the year ended December 31:

Outstanding at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested and outstanding at December 31, 2013 . . . . . . . . . . . .
Weighted average remaining contractual life (in years) . . . . . . . . . .

Weighted Average
Grant Date
Fair Value
$21.55
—
23.46
19.32
$19.61
—
20.82
17.97
$17.97
46.51
17.97
—
$46.51

Shares
28,164
—
(14,187)
(765)
13,212
—
(7,641)
(40)
5,531
50,062
(5,531)
—
50,062
2.9

The weighted average grant date fair value of restricted stock that vested during 2013, 2012 and 2011

was $99,000, $159,000 and $333,000, respectively. The net value of unrecognized compensation cost related
to unvested restricted stock awards aggregated $2,210,000, $16,000 and $127,000 at December 31, 2013, 2012
and 2011, respectively.

For the years ended December 31, 2013, 2012 and 2011 we had $135,000, $110,000 and $187,000,

respectively, of total compensation expense related to restricted stock-based arrangements. The expense is
included in corporate general and administrative expenses in our results of operations. The associated tax
beneﬁt recognized for the years ended December 31, 2013, 2012 and 2011 was $53,000, $45,000 and $77,000,
respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

8. Employee Beneﬁt Plans

401(k) Plan

We have a deﬁned contribution pension plan (‘‘401(k) Plan’’) that covers substantially all employees.

Employees can elect to have a portion of their wages withheld and contributed to the plan. The 401(k) Plan
also allows us to make a discretionary contribution. Total administrative expense under the 401(k) Plan was
$5,000, $12,000 and $16,000 in 2013, 2012 and 2011, respectively. The Company’s discretionary contribution
to the plan was approximately $240,000 and $230,000 for the years ended December 31, 2013 and 2012,
respectively. The Company did not make a discretionary contribution to the 401(k) Plan for the year ended
December 31, 2011.

Deferred Compensation Plan

In 1999 we established a Nonqualiﬁed Deferred Compensation Plan which allows officers and certain
management employees to annually elect to defer a portion of their compensation, on a pre-tax basis, until
their retirement. The retirement beneﬁt to be provided is based on the amount of compensation deferred and
any earnings thereon. Deferred compensation expense for the years ended December 31, 2013, 2012 and 2011
was $193,000, $126,000 and $141,000, respectively. We invest in company-owned life insurance policies to
assist in funding these programs. The cash surrender values of these policies are in a rabbi trust and are
recorded as our assets.

Split Dollar Officer Life Insurance

The Company provides split dollar insurance beneﬁts to certain executive officers and records an asset

equal to the cumulative premiums paid on the related policies, as the Company will fully recover these
premiums under the terms of the plan. The Company retains a collateral assignment of the cash surrender
values and policy death beneﬁts payable to insure recovery of these premiums.

9. Related Party Transactions

Principal Stockholder Employment Agreement

In June 2011, we entered into a new employment agreement with Edward K. Christian, Chairman,

President and CEO, which became effective as of June 1, 2011, and replaces and supersedes his prior
employment agreement. The new employment agreement terminates on March 31, 2018. The agreement
provides for an annual base salary of $860,000 (subject to annual increases on each anniversary date not less
than the greater of 3% or a deﬁned cost of living increase). Mr. Christian may defer any or all of his annual
salary.

Under the agreement, Mr. Christian is eligible for discretionary and performance bonuses, stock options

and/or stock grants in amounts determined by the Compensation Committee and will continue to participate in
the Company’s beneﬁt plans. The Company will maintain insurance policies, will furnish an automobile, will
pay for an executive medical plan and will maintain an office for Mr. Christian at its principal executive
offices and in Sarasota County, Florida. The agreement provides certain payments to Mr. Christian in the event
of his disability, death or a change in control. Upon a change in control, Mr. Christian may terminate his
employment. The agreement also provides generally that, upon a change in control, the Company will pay
Mr. Christian an amount equal to 2.99 times the average of his total annual salary and bonuses for each of the
three immediately preceding periods of twelve consecutive months, plus an additional amount for tax
liabilities, related to the payment. For the three years ended December 31, 2013 his average annual
compensation, as deﬁned by the employment agreement was approximately $1,382,000.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. Related Party Transactions − (continued)

In addition, if Mr. Christian’s employment is terminated for any reason, other than for cause, the
Company will continue to provide health insurance and medical reimbursement and maintain existing life
insurance policies for a period of ten years, and the current split dollar life insurance policy shall be
transferred to Mr. Christian and his wife, and the Company shall reimburse Mr. Christian for any tax
consequences of such transfer. The agreement contains a covenant not to compete restricting Mr. Christian
from competing with the Company in any of its markets if he voluntarily terminates his employment with the
Company or is terminated for cause, for a three year period thereafter.

On December 19, 2011, Mr. Christian agreed to defer approximately $100,000 of his 2012 salary to be

paid 100% on January 25, 2013. On December 27, 2012, Mr. Christian agreed to defer approximately
$100,000 of his 2013 salary to be paid 100% on January 10, 2014. On December 16, 2013, Mr. Christian
agreed to defer approximately $100,000 of his 2014 salary to be paid 100% on January 16, 2015.

Change in Control Agreements

In December 2007, Samuel D. Bush, Senior Vice President and Chief Financial Officer, Steven J.
Goldstein, Executive Vice President and Group Program Director, Warren S. Lada, Executive Vice President
of Operations and Marcia K. Lobaito, Senior Vice President, Corporate Secretary and Director of Business
Affairs, entered into Change in Control Agreements. A change in control is deﬁned to mean the occurrence of
(a) any person or group becoming the beneﬁcial owner, directly or indirectly, of more than 30% of the
combined voting power of the Company’s then outstanding securities and Mr. Christian ceasing to be
Chairman and CEO of the Company; (b) the consummation of a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which results in the voting securities of the
Company outstanding immediately prior thereto continuing to represent more than 50% of the combined
voting securities of the Company or such surviving entity; or (c) the approval of the stockholders of the
Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets.

If there is a change in control, the Company shall pay a lump sum payment within 45 days thereof of

1.5 times the average of the executive’s last three full calendar years of such executive’s base salary and any
annual cash bonus paid. In the event that such payment constitutes a ‘‘parachute payment’’ within the meaning
of Section 280G subject to an excise tax imposed by Section 4999 of the Internal Revenue Code, the
Company shall pay the executive an additional amount so that the executive will receive the entire amount of
the lump sum payment before deduction for federal, state and local income tax and payroll tax. In the event of
a change in control (other than the approval of plan of liquidation), the Company or the surviving entity may
require as a condition to receipt of payment that the executive continue in employment for a period of up to
six months after consummation of the change in control. During such six months, executive will continue to
earn his pre-existing salary and beneﬁts. In such case, the executive shall be paid the lump sum payment upon
completion of the continued employment. If, however, the executive fails to remain employed during this
period of continued employment for any reason other than (a) termination without cause by the Company or
the surviving entity, (b) death, (c) disability or (d) breach of the agreement by the Company or the surviving
entity, then executive shall not be paid the lump sum payment. In addition, if the executive’s employment is
terminated by the Company without cause within six months prior to the consummation of a change in
control, then the executive shall be paid the lump sum payment within 45 days of such change in control.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. Related Party Transactions − (continued)

Transactions with Affiliate and Other Related Party Transactions

Surtsey Media, LLC (‘‘Surtsey Media’’) owns the assets of television station KVCT in Victoria, Texas.

Surtsey Media is a multi-media company 100%-owned by the daughter of Mr. Christian, our President, Chief
Executive Officer and Chairman. We operate KVCT under a Time Brokerage Agreement (‘‘TBA’’) with
Surtsey Media which we entered into in May 1999. Under the FCC’s ownership rules, we are prohibited from
owning or having an attributable or cognizable interest in this station. Under the TBA, during 2012 and 2011,
we paid Surtsey Media fees of approximately $3,100 per month plus accounting fees and reimbursement of
expenses actually incurred in operating the station. In January 2012, the TBA was amended. Pursuant to the
amendment, (i) the term is extended nine years commencing from June 1, 2013, with rights to extend for two
additional eight year terms, (ii) we paid Surtsey Media an extension fee of $27,950 upon execution of the
amendment, (iii) the monthly fees, payable to Surtsey Media are increased for each extension period, and
(iv) we have an exclusive option, while the TBA is in effect, to purchase all of the assets of station KVCT,
subject to certain conditions, based on a formula. Under the amended TBA, during 2013 we paid Surtsey
Media fees of approximately $3,400 per month plus accounting fees and reimbursement of expenses actually
incurred in operating the station.

In March 2003, we entered into an agreement of understanding with Surtsey Media whereby we have

guaranteed up to $1,250,000 of the debt incurred, in closing the acquisition of a construction permit for
KFJX-TV station in Pittsburg, Kansas, a full power Fox affiliate serving Joplin, Missouri. At December 31,
2013, there was $1,078,000 of debt outstanding under this agreement. We do not have any recourse provision
in connection with our guarantee that would enable us to recover any amounts paid under the guarantee. As a
result, at December 31, 2013, we have recorded $1,078,000 in debt and $1,000,000 in intangible assets,
primarily broadcast licenses. In consideration for the guarantee, Surtsey Media entered into various agreements
with us relating to the station, including a Shared Services Agreement, Technical Services Agreement, and
Agreement for the Sale of Commercial Time and Broker Agreement (the ‘‘Station Agreements’’). We paid fees
under the agreements during 2012 and 2011 of approximately $4,100 per month plus accounting fees and
reimbursement of expenses actually incurred in operating the station. We generally prepay Surtsey quarterly
for its estimated expenses. The station went on the air for the ﬁrst time on October 18, 2003. Under the
FCC’s ownership rules we are prohibited from owning or having an attributable or cognizable interest in this
station. In January 2012, the Station Agreements were amended. Pursuant to the amendment, (i) the Broker
Agreement and the Technical Services Agreement are terminated, (ii) the terms of the continuing Station
Agreements are extended nine years commencing from June 1, 2013, with rights to extend for two additional
eight year terms, (iii) we paid Surtsey Media $37,050 upon execution of the amendment, (iv) the monthly fees
payable to Surtsey Media were increased for each extension period, and (v) we have an exclusive option,
while the Agreement for the Sale of Commercial Time and Shared Services Agreement are in effect, to
purchase all of the assets of Station KFJX subject to certain conditions, based on a formula, together with a
payment of $1.2 million. Under the amended Station Agreements, during 2013 we paid fees of approximately
$4,500 per month plus accounting fees and reimbursement of expenses actually incurred in operating the
station.

Surtsey Productions, Inc., the parent company of Surtsey Media, leases office space in a building owned
by us, and paid us rent of $6,000, $10,000 and $10,000 during the years ended December 31, 2013, 2012 and
2011, respectively.

In December 2013, we sold a used vehicle to the son of Mr. Christian. The vehicle was sold at its fair

market value of $41,000. In February 2012, we sold a used vehicle to the daughter of Mr. Christian. The
vehicle was sold at its fair market value of $38,000.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Common Stock

Dividends. Stockholders are entitled to receive such dividends as may be declared by our Board of

Directors out of funds legally available for such purpose. However, no dividend may be declared or paid in
cash or property on any share of any class of Common Stock unless simultaneously the same dividend is
declared or paid on each share of the other class of common stock. In the case of any stock dividend, holders
of Class A Common Stock are entitled to receive the same percentage dividend (payable in shares of Class A
Common Stock) as the holders of Class B Common Stock receive (payable in shares of Class B Common
Stock).

Voting Rights. Holders of shares of Common Stock vote as a single class on all matters submitted to a

vote of the stockholders, with each share of Class A Common Stock entitled to one vote and each share of
Class B Common Stock entitled to ten votes, except (i) in the election for directors, (ii) with respect to any
‘‘going private’’ transaction between the Company and the principal stockholder, and (iii) as otherwise
provided by law.

In the election of directors, the holders of Class A Common Stock, voting as a separate class, are entitled

to elect twenty-ﬁve percent, or two, of our directors. The holders of the Common Stock, voting as a single
class with each share of Class A Common Stock entitled to one vote and each share of Class B Common
Stock entitled to ten votes, are entitled to elect the remaining directors. The Board of Directors consisted of
seven members at December 31, 2013. Holders of Common Stock are not entitled to cumulative voting in the
election of directors.

The holders of the Common Stock vote as a single class with respect to any proposed ‘‘going private’’
transaction with the principal stockholder or an affiliate of the principal stockholder, with each share of each
class of Common Stock entitled to one vote per share.

Under Delaware law, the affirmative vote of the holders of a majority of the outstanding shares of any

class of common stock is required to approve, among other things, a change in the designations, preferences
and limitations of the shares of such class of common stock.

Liquidation Rights. Upon our liquidation, dissolution, or winding-up, the holders of Class A Common

Stock are entitled to share ratably with the holders of Class B Common Stock in accordance with the number
of shares held in all assets available for distribution after payment in full of creditors.

In any merger, consolidation, or business combination, the consideration to be received per share by the

holders of Class A Common Stock and Class B Common Stock must be identical for each class of stock,
except that in any such transaction in which shares of common stock are to be distributed, such shares may
differ as to voting rights to the extent that voting rights now differ among the Class A Common Stock and the
Class B Common Stock.

Other Provisions. Each share of Class B Common Stock is convertible, at the option of its holder, into

one share of Class A Common Stock at any time. One share of Class B Common Stock converts
automatically into one share of Class A Common Stock upon its sale or other transfer to a party unaffiliated
with the principal stockholder or, in the event of a transfer to an affiliated party, upon the death of the
transferor.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

11. Commitments and Contingencies

Leases

We lease certain land, buildings and equipment under noncancellable operating leases. Rent expense for

the year ended December 31, 2013 was $1,394,000 ($1,400,000 and $1,511,000 for the years ended
December 31, 2012 and 2011, respectively).

Minimum annual rental commitments under noncancellable operating leases consisted of the following at

December 31, 2013 (in thousands):

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,330
1,150
913
763
645
3,921
$8,722

Broadcast Program Rights

We have entered into contracts for broadcast program rights that expire at various dates during the next

ﬁve years. The aggregate minimum payments relating to these commitments consisted of the following at
December 31, 2013 (in thousands):

Amounts due within one year (included in accounts payable)

. . . . . . . . . . . . . . . .

$ 622
540
355
188
40
40
$1,785
622
$1,163

Contingencies

In 2003, in connection with our acquisition of one FM radio station, WJZK-FM serving the Columbus,
Ohio market, we entered into an agreement whereby we would pay the seller up to an additional $1,000,000 if
we obtain approval from the FCC for a city of license change.

12. Fair Value Measurements

Fair value is deﬁned as the price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. To increase the
comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies
used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities,
quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs in which there is little or no market data available, which requires

management to develop its own assumptions in pricing the asset or liability.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

12. Fair Value Measurements − (continued)

We measure the fair value of time deposits based on quoted market prices of similar assets and other

signiﬁcant inputs derived from or corroborated by observable market data and are considered a level 2.
Interest on the Credit Facility is at a variable rate, and as such the debt obligation outstanding approximates
fair value and is considered a level 2.

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under the
circumstances and events described in Note 2 — Broadcast Licenses and Other Intangibles, and are adjusted
to fair value only when the carrying values are more than the fair values.

During the fourth quarter of 2013, as a result of our annual impairment test, the Company wrote down

broadcast licenses with a carrying value of $8,620,000 to their fair value of $6,587,000, resulting in a
non-cash impairment charge of $2,033,000, which is included in net income for the year ended December 31,
2013. The categorization of the framework used to price the assets is considered a level 3, due to the
subjective nature of the unobservable inputs used to determine the fair value. (See Note 2 for the disclosure of
certain key assumptions used to develop the unobservable inputs.)

In 2012 the Company reviewed the fair value of its broadcasting licenses, net property and equipment

and other intangibles, and concluded that these assets were not impaired as the fair value of these assets
equaled or exceeded their carrying values. As such, no non-recurring fair value measures were utilized in
2012.

13. Segment Information

We evaluate the operating performance of our markets individually. For purposes of business segment

reporting, we have aligned operations with similar characteristics into two business segments: Radio and
Television.

The Radio segment includes twenty-three markets, which includes all ninety-one of our radio stations and

ﬁve radio information networks. The Television segment includes two markets and consists of four television
stations and four low power television (‘‘LPTV’’) stations. The Radio and Television segments derive their
revenue from the sale of commercial broadcast inventory. The category ‘‘Corporate general and
administrative’’ represents the income and expense not allocated to reportable segments.

Radio

Television

Corporate
and Other

Consolidated

(In thousands)

Year ended December 31, 2013:
Net operating revenue . . . . . . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . .
Impairment of intangible assets
. . . . . . . . . . . . . . . .
Operating income (loss) from continuing operations . . .

Depreciation and amortization . . . . . . . . . . . . . . . . .

Capital additions

. . . . . . . . . . . . . . . . . . . . . . . . . .

Broadcast licenses, net
. . . . . . . . . . . . . . . . . . . . . .
Total assets at December 31, 2013 . . . . . . . . . . . . . .

$109,818
79,933
—
2,033
$ 27,852

5,119

3,884

$ 78,872
$143,927

$19,660
13,044
—
—
$ 6,616

$ 1,421

872

$ 9,588
$23,274

$ —
—
8,172
—
$ (8,172)

228

396

$ —
$26,023

$129,478
92,977
8,172
2,033
$ 26,296

6,768

5,152

$ 88,460
$193,224

Saga Communications, Inc.

Notes to Consolidated Financial Statements

13. Segment Information − (continued)

Radio

Television

Corporate
and Other

Consolidated

(In thousands)

Year ended December 31, 2012:
Net operating revenue . . . . . . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . .
Operating income (loss) from continuing operations . . .

Depreciation and amortization . . . . . . . . . . . . . . . . .

Capital additions

. . . . . . . . . . . . . . . . . . . . . . . . . .

$111,763
77,992
—
$ 33,771

5,222

3,786

Broadcast licenses, net

. . . . . . . . . . . . . . . . . . . . . .

$ 80,773

Total assets at December 31, 2012 . . . . . . . . . . . . . .

$148,163

$18,496
12,296
—
$ 6,200

$ 1,411

977

$ 9,588

$23,013

$ —
—
7,960
$ (7,960)

225

$130,259
90,288
7,960
$ 32,011

6,858

4,809

$ —

$ 90,361

$26,154*

$197,330

Includes $2,893 of Assets held for sale.

Radio

Television

Corporate
and Other

Consolidated

(In thousands)

Year ended December 31, 2011:
Net operating revenue . . . . . . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . .
Operating income (loss) from continuing operations . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Capital additions

$108,938
79,130
—
$ 29,808
5,518
$
3,990
$

$16,335
11,799
—
$ 4,536
$ 1,351
$ 1,268

$ —
—
7,590
$(7,590)
232
$
152
$

$125,273
90,929
7,590
$ 26,754
7,101
$
5,410
$

Saga Communications, Inc.

Notes to Consolidated Financial Statements

14. Quarterly Results of Operations (Unaudited)

March 31,

June 30,

2013

2012

2013

2012

September 30,
2012
2013

December 31,
2012
2013

Net operating revenue . . . . . . . . . . $28,957
22,088
Station operating expenses
. . . . . . .
1,948
Corporate G&A . . . . . . . . . . . . . .
—
. . . .
Impairment of intangible assets
Operating income from continuing

operations . . . . . . . . . . . . . . . .

4,921

Other (income) expenses:

(In thousands, except per share data)

$29,323
22,360
1,949
—

$33,832
23,493
1,982
—

$32,986
21,959
1,940
—

$32,929
23,598
2,051
—

$32,409
22,379
1,910
—

$33,760
23,798
2,191
2,033

$35,541
23,590
2,161
—

5,014

8,357

9,087

7,280

8,120

5,738

9,790

Interest expense . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . .

358
25

528
(2)

357
66

458
(8)

308
(144)

381
145

282
2

366
144

Income from continuing operations

before tax . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . .
Income from continuing operations,

net of tax . . . . . . . . . . . . . . . .

Income (loss) from discontinued

4,538
1,812

4,488
1,785

7,934
3,130

8,637
3,438

7,116
2,820

7,594
3,227

5,454
2,230

9,280
3,489

2,726

2,703

4,804

5,199

4,296

4,367

3,224

5,791

operations, net of tax . . . . . . . . .

223
Net income . . . . . . . . . . . . . . . . . $ 2,949

2
$ 2,705

—
$ 4,804

(67)
$ 5,132

—
$ 4,296

(39)
$ 4,328

—
$ 3,224

(31)
$ 5,760

Basic earnings (loss) per share:
From continuing operations
From discontinued operations . . . .
Earnings per share . . . . . . . . . . . $

. . . . . $

.48
.04
.52

Weighted average common shares . . .

5,673

Diluted earnings (loss) per share:
From continuing operations
From discontinued operations . . . .

. . . . . $

Diluted earnings per share

. . . . . . . $

.47
.04
.51

Weighted average common and

.48
—
.48

5,658

.48
—
.48

.85
—
.85

5,683

.84
—
.84

.92
(.01)
.91

5,661

.92
(.01)
.91

.76
—
.76

5,686

.75
—
.75

.77
(.01)
.76

5,661

.77
(.01)
.76

.56
—
.56

5,686

.56
—
.56

1.02
—
1.02

5,663

1.02
(.01)
1.01

common equivalent shares . . . . . .

5,738

5,678

5,745

5,663

5,754

5,670

5,751

5,692

During the fourth quarter of 2013, the Company recognized a pre-tax impairment charge of $2,033,000 to

reduce the carrying value of certain radio broadcast licenses to their estimated fair value.

15. Subsequent Event

On January 31, 2014, we acquired an FM radio station (WFIZ-FM) and three translators, serving the

Ithaca, New York market for approximately $715,000.

Pursuant to the requirements of Section 13 or 15(d) 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,
on March 17, 2014.

SIGNATURES

SAGA COMMUNICATIONS, INC.

By: /s/ Edward K. Christian
Edward K. Christian
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the registrant and in the capacities indicated on March 17, 2014.

Signatures

/s/ Edward K. Christian
Edward K. Christian

/s/ Samuel D. Bush
Samuel D. Bush

/s/ Catherine A. Bobinski
Catherine A. Bobinski

/s/ Clarke R. Brown, Jr.
Clarke R. Brown, Jr.

/s/ Timothy J. Clarke
Timothy J. Clarke

/s/ Roy F. Coppedge III
Roy F. Coppedge

/s/ David B. Stephens
David B. Stephens

/s/ Gary G. Stevens
Gary G. Stevens

President, Chief Executive Officer and Chairman of the Board

Senior Vice President, Chief Financial Officer and Treasurer

Senior Vice President/Finance, Chief Accounting Officer and
Corporate Controller

Director

Exhibit No.

3(a)

3(b)

3(c)

4(a)

4(b)

10(a)

10(b)

10(c)

10(d)

10(e)

10(f)

10(g)
10(h)
10(i)
10(j)
10(k)
21
23.1
31.1

31.2

101.INS

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

8
5
5
5
5
*
*
*

EXHIBIT INDEX

Description

Second Restated Certiﬁcate of Incorporation, restated as of December 12, 2003.

Certiﬁcate of Amendment to the Second Restated Certiﬁcate of Incorporation.

Bylaws, as amended May 23, 2007.

Credit Agreement dated as of June 13, 2011 among the Company and Bank of America,
N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the Other Lenders
party thereto, Merrill Lynch Pierce, Fenner & Smith, Incorporated and J.P. Morgan
Securities LLC, as Joint Lead Arrangers and Joint Book Managers, JPMorgan Chase
Bank, N.A., as Syndication Agent, Huntington National Bank, as Documentation Agent,
and certain other ﬁnancial institutions as party thereto.

First Amendment to Credit Agreement dated as of May 31, 2013.

Summary of Executive Insured Medical Reimbursement Plan.

Saga Communications, Inc. 2003 Employee Stock Option Plan.

Chief Executive Officer Annual Incentive Plan.

Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation
Plan.
Form of Stock Option Agreement under the Second Amended and Restated Saga
Communications, Inc. 2005 Incentive Compensation Plan.
Form of Restricted Stock Option Agreement under the Second Amended and Restated
Saga Communications, Inc. 2005 Incentive Compensation Plan.
Employment Agreement of Edward K. Christian dated as of June 17, 2011.
Change in Control Agreement of Samuel D. Bush dated as of December 28, 2007.
Change in Control Agreement of Steven J. Goldstein dated as of December 28, 2007.
Change in Control Agreement of Warren S. Lada dated as of December 28, 2007.
Change in Control Agreement of Marcia K. Lobaito dated as of December 28, 2007.
Subsidiaries.
Consent of Ernst & Young LLP.
Certiﬁcation of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certiﬁcation of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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.

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Calculation Linkbase Document.

XBRL Taxonomy Extension Deﬁnition Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

*
1

Filed herewith.
Exhibit ﬁled with the Company’s Registration Statement on Form S-1 (File No. 33-47238) ﬁled on
December 10, 1992 and incorporated by reference herein.
Exhibit ﬁled with the Company’s Form 10-Q for the quarter ended June 30, 2003 and incorporated by
reference herein.
Exhibit ﬁled with the Company’s Registration Statement on Form 8-A (File No. 001-11588) ﬁled on
January 6, 2004 and incorporated by reference herein.
Exhibit ﬁled with the Company’s Form 10-K for the year ended December 31, 2007 and incorporated by
reference herein.
Exhibit ﬁled with the Company’s Form 8-K ﬁled on January 4, 2008 and incorporated by reference
herein.
Exhibit ﬁled with the Company’s Form 8-K ﬁled on January 29, 2009 and incorporated by reference
herein.
Exhibit ﬁled with the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders and
incorporated by reference herein.
Exhibit ﬁled with the Company’s Form 10-Q for the quarter ended June 30, 2011 and incorporated by
reference herein.
Exhibit ﬁled with the Company’s Form 8-K ﬁled on May 31, 2013 and incorporated by reference herein.

9
10 Exhibit ﬁled as Appendix A to the Company’s Consent Solicitation (File No. 001-11588) ﬁled on

September 17, 2013 and incorporated by reference herein.

11 Exhibit ﬁled with the Company’s Form 8-K ﬁled on October 16, 2013 and incorporated by reference

herein.

[This page intentionally left blank.]

Stockholder Information

AUDITORS
Ernst & Young LLP, Detroit, MI

TRANSFER AGENT
Computershare, Canton, MA

PUBLICATIONS
The Company’s Annual Report Form 10-K and Quarterly Reports to Stockholders are available free of charge to
stockholders. Inquiries are welcome by letter or telephone to Samuel D. Bush, Senior Vice President, Treasurer and
CFO, at the Saga Corporate Office.
Stockholders whose stock is held in street name are encouraged to write to the company to have their names placed
on the ﬁnancial mailing list, enabling them to receive annual and interim reports without delay.
You may ﬁnd more information about us at our Internet website located at www.sagacommunications.com. Our
Annual report on Form 10-K, our Quarterly Reports on Form 10-Q, our current reports on Form 8-K and any
amendments to those reports are available free of charge on our Internet website as soon as reasonably practicable
after we electronically ﬁle such material with, or furnish it to, the SEC.

ANNUAL MEETING
The Annual Meeting of Stockholders will be held on Monday, May 12, 2014 at 9:00 am Eastern Daylight Time, at
the Company’s corporate offices at 73 Kercheval Avenue, Grosse Pointe Farms, MI.
This press release contains forward-looking statements that are based upon current expectations and involve certain
risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform act of 1995. Words such
as ‘‘believes,’’ ‘‘expects,’’ ‘‘anticipates’’ and other similar expressions are intended to identify forwardlooking
statements. Key risks are described in the reports Saga Communications, Inc. periodically ﬁles with the U.S.
Securities and Exchange Commission. Readers should note that these statements may be impacted by several
factors, including economic changes in the radio and television broadcast industry in general, as well as Saga’s
actual performance. Results may vary from those stated herein and Saga undertakes no obligation to update the
information contained herein.

CORPORATE OFFICERS
Edward K. Christian
President, Chief Executive Offıcer and
Chairman of the Board
Steven J. Goldstein
Executive Vice President,
Group Program Director
Warren S. Lada
Executive Vice President − Operations
Samuel D. Bush
Senior Vice President, Treasurer
and Chief Financial Offıcer
Marcia K. Lobaito
Senior Vice President, Corporate Secretary and
Director of Business Affairs
Catherine A. Bobinski
Senior Vice President − Finance, Chief Accounting
Offıcer and Corporate Controller

BOARD OF DIRECTORS
Edward K. Christian
Chairman of the Board
Gary Stevens**
Managing Director
Gary Stevens & Co.
Clarke Brown**
Former President − Radio Division,
Jefferson − Pilot Communications
David B. Stephens*
Former President and CEO,
St. John Hospital and Medical Center and
Former Executive Vice President,
Comerica Bank
Roy F. Coppedge III*
Founder & Former Managing Director,
BV Investment Partners
Timothy J. Clarke*
Former President and Owner,
Clarke Advertising & Public Relations, Inc.
* Denotes participation in the Audit and Finance Committee
** Denotes participation the Compensation Committee