Saga Communications, Inc. Annual Report 2014

FY2014 Annual Report · Saga Communications, Inc.

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2014 Annual Report

2014 Annual Letter

To our fellow shareholders:

I received an email, from my CFO several days ago, a very simple one − ‘‘Ed, ahhh, it’s time again for your
annual shareholders letter. Need it by Friday latest.’’ Oh, the dreaded deadline.

Now it’s Wednesday and, for some reason, this blank sheet of paper hasn’t miraculously ﬁlled itself with
gushing and effusive words about Saga. We will get to that shortly but ﬁrst the obligatory summary of the
past year in review.

Net operating revenue increased 3.5% for the year. Free cash ﬂow for the year remained very strong at
$21.0 million. During the year we paid $10.3 million in dividends to our shareholders. We have now returned
over $27 million in cash to our shareholders through dividends since December, 2012.

If you are waiting for those effusive words, you will have to read on a little further because I have some
thoughts that I need to share. For those of you who have read these missives over the years, you know that I
have an absolute passion, commitment, respect, etc. for broadcasting. Done properly, it ﬁlls a great societal
need and it is a nicely proﬁtable endeavor. Notice I didn’t say ‘‘industry.’’ Even though we are referred to as
that, we really aren’t. We are a ‘‘creative endeavor’’ business.

However, many don’t see it that way. Recently I read the transcripts on other earnings conference calls. Either
in the transcripts or in outside conversation, I have heard the following phrase three distinct times in the last
few weeks, ‘‘I need an apples to apples comparison.’’ ‘‘Can you provide an apples to apples analysis?’’ ‘‘So,
apples to apples, what do you think?’’ I’m sure glad that nobody asked me that and it got me to thinking.

Let’s, just for starters, say that apples are like radio and TV stations.

I ﬁrst visited my local supermarket and noticed six types of apples for sale, and I asked the produce manager,
‘‘What’s the best apple?’’ ‘‘For what?’’ he replied. ‘‘Cooking, Baking, Eating, Canning or Saucing?’’

‘‘OK, eating,’’ I replied. ‘‘Depends,’’ he replied, ‘‘on whether you like them tart, sweet, or tangy.’’ At this
point it appeared that I needed to do some research.

In brief, there are known to be 7,500 apple cultivars (new word for me). 2,500 different varieties are grown in
the United States alone.

And, surprise, surprise, there is up to a 40% difference in price between apple varieties, could even be more.

OK, Ed. How does this relate to broadcasting?

Two areas — sales and programming.

Let’s take programming ﬁrst. We produce and grow the more expensive variety of apples as we believe that
our audience wants that ‘‘little extra.’’ It is, and always has been, that our mission is to super serve our local
audiences. Our mantra is, ‘‘lf we do compelling radio and TV, people will listen and watch. If we create and
craft compelling advertising messages for our listeners and viewers and run these messages with regularity
and frequency, our audiences will notice and respond positively. Our advertisers will notice how our stations
work for them and will advertise more.’’ Life is good, business is good.

We expect to charge more for our apples than other producers. Many of our stations have different formats
and audiences and it is our mission to only grow apple varieties such as Honeycrisp, Gala and Fuji. They cost
more to produce, but are worth it.

Now, the sales part. Locally our clients understand our value. Nationally, we face an advertising world that
only buys apples...the cheaper, the better. The more for less, the better. It puts us at a disadvantage as we
can’t and won’t sell our best apples at bulk prices. It just doesn’t work well for us...nor for you, our
shareholders.

The frequently used term ‘‘apples to apples’’ just doesn’t work for us.

Unfortunately, our industry is proliferated with bulk apple producers right now and we just have to wait it out.
For some unexplained reason, the terms ‘‘well crafted’’ and ‘‘quality’’ are not buzz words for national
advertisers. This does puzzle me and, if there is any person with answers, please let me know. At Saga we
have made positive steps to accelerate our sales efforts on the local level where decision makers can see and
hear the product they are buying. They are aware that, though all apples can be made shiny, it is what is
beneath the skin that counts. Though our national business is now down to less than 14% of our revenue (the
bulk apple buyers), our local continues to grow (the quality conscious buyers).

Hopefully, the idea of quality and price will return to the national level, however, in the interim, we know
only one way to operate and will continue to do so.

Day after day, year upon year, our stations go out of their way to integrate themselves into their respective
communities. We know we have to earn the respect of our towns by continuous, dependable help and support
to all facets of community living. It is the professional pride and the community’s ‘‘Thanks for helping and
caring’’ that makes us know what we do is important and worthwhile.

I could go on and on and talk about all the events that we do, the coverage and news that we provide about
daily events, our support and partnerships with community organizations, but I think you get the picture. Our
quality is important and we honestly care. It is a winning combination. It is well over 28 years that we have
been doing...do/repeat/do. Twenty eight fulﬁlling and proﬁtable years for our 1200 employees and our
hundreds of shareholders.

I would be remiss in not extending an invitation to all of you to call and visit any of our stations if you are in
our markets or visiting there.

You can feel the energy and the pride of our professionals.

Even though our industry faces the same economic issues that face our clients, such as healthy retail sales and
consumer conﬁdence, we march on with our dedication.

Our apples are different, better than most, and can’t be broadly compared. Come see for yourself, as I said,
and we will gladly give you a tour of our orchards. One ﬁnal thought − If anyone asks you for an apples to
apples comparison between broadcast companies, visually imagine a bushel of apples, which is about 125
apples, and think of this bushel basket containing 125 different varieties (about the same number of radio and
TV stations in the Saga ‘‘basket’’). How would you price this compared to the bushel basket sitting next to it?
Just asking...

Thank you for understanding and investing in Saga Communications.

Ed Christian
President/Chairman/CEO and keeper of the broadcast cultivars

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, 2014
OR

□

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

For the transition period for

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:2)

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:2)

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:2) 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:2) 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 □

Smaller reporting company □

Non-accelerated ﬁler □

Accelerated ﬁler (cid:2)

(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:2)
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 30, 2014 on the NYSE MKT: $210,152,282.

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, 2015 was 4,955,806 and 843,034, respectively.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2015 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.

Saga Communications, Inc.
2014 Form 10-K Annual Report

Table of Contents

PART I

Item 1.

Item 1A.

Item 1B.

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Item 7.

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

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

Unresolved Staff Comments

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

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.

Item 9A.

Item 9B.

Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

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

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

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

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

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

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

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

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

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 2015 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.

Item 1. Business

PART I

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast
properties. As of February 28, 2015, we owned and/or operated four television stations and ﬁve low-power
television stations serving two markets, one radio information network, 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, 2015:

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
WREE

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

(footnotes follow tables)

2014
Market
Ranking
By Radio
Revenue(b)

2014
Market
Ranking
By Radio
Market(b)

Station Format

Target
Demographics

Men 35 − 54
Men 25 − 49

Men 18 − 49
Men 35 − 54

Classic Rock
Rock
Urban Adult Contemporary Women 25 − 54
12+
Religious
Adults 18 − 34
Contemporary Hits
Women 25 − 54
Adult Contemporary
Adults 25 − 49
Adult Hits
Adult Hits
Adults 35 − 54
Hot Adult Contemporary Women 25 − 44
Rock
Classic Rock
Hot Adult Contemporary Women 25 − 44
Adults 45 − 64
Classic Hits/Oldies
Men 18 − 34
Rock
Women 25 − 54
Adult Contemporary
Contemporary Hits
Adults 18 − 34
Hot Adult Contemporary Women 25 − 44
Adults 35 − 64
News
Adults 45 − 64
Classic Hits/Oldies
Adults 25 − 54
Country
Adults 25 − 54
Adult Album Alternative
Men 35 − 54
Classic Rock
Men 18 − 34
Rock
Adults 25 − 54
Adult Album Alternative
Adults 18 − 34
Contemporary Hits
Adults 25 − 54
Adult Album Alternative
Women 25 − 54
Adult Contemporary
Adults 25 − 54
Country
Women 25 − 54
Adult Contemporary
Adults 35 − 54
Classic Hits
Contemporary Hits
Adults 18 − 34
Hot Adult Contemporary Women 25 − 44
Adults 25 − 54
Country
Adults 35 − 44
Adult Hits

30
30
30
30
30
32
32
32
32
40
40
72
72
72
72
72
79
79
79
79
79
94
94
N/A
N/A
N/A
N/A
N/A
114
114
114
158
158
158

38
38
38
38
38
37
37
37
37
43
43
73
73
73
73
73
91
91
91
91
91
92
92
N/A
N/A
N/A
N/A
N/A
199
199
199
211
211
211

Station
WYXY
WLRW-HD2
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

WRND-FM

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

Market(a)
Champaign, IL
Champaign, IL
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

(footnotes follow tables)

2014
Market
Ranking
By Radio
Revenue(b)
158
158
158
158
N/A
N/A
N/A
N/A
N/A
164
164
164
164
195
N/A
N/A
N/A
224
224
224
224
224
N/A

2014
Market
Ranking
By Radio
Market(b)
211
211
211
211
N/A
N/A
N/A
N/A
N/A
159
159
159
159
264
N/A
N/A
N/A
227
227
227
227
227
N/A

Station Format

Target
Demographics
Adults 45 − 64
Classic Country
Adults 45 − 64
Oldies/Classic Hits
Men 18 − 49
Rock
Adults 18 − 34
Contemporary Hits
Men 25 − 54
Classic Rock
Adults 45 − 64
Classic Hits/Oldies
Adults 18 − 34
Contemporary Hits
Adults 25 − 54
Country
Adults 25 − 54
Variety Hits
Women 25 − 54
Adult Contemporary
Men 18 − 49
Rock
Men 25 − 54
Sports
Adults 18 − 49
Adult Album Alternative
Adults 35+
Country
Men 25 − 54
Rock
Women 25 − 54
Adult Contemporary
Adults 18 − 49
Adult Album Alternative
Men 25 − 54
Classic Hits
Adults 25 − 54
Country
Women 25 − 54
Adult Contemporary
Adults 18 − 34
Contemporary Hits
Contemporary Christian
Adults 25 − 54
Hot Adult Contemporary Women 25 − 54

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

Country

Adults 25 − 54

N/A

Rock

Men 18 − 34

N/A

Classic Hits

Adults 35 − 54

Men 25 − 54
Classic Rock
Women 25 − 54
Adult Contemporary
Adults 35+
Country
Women 25 − 54
Adult Contemporary
Adults 35+
Country
Adults 45 − 64
Classic Hits/Oldies
Classic Hits
Adults 25 − 54
Hot Adult Contemporary Women 25 − 54
Women 35 − 54
Adult Contemporary
Adults 25 − 54
Country
Men 25 − 54
Classic Rock
Adults 45 − 64
Classic Hits/Oldies
Adults 25 − 54
Classic Hits
Men 25 − 54
Classic Rock
Adults 25 − 54
Country
Women 25 − 54
Adult Contemporary
Adults 35 − 54
Adult Album Alternative

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
WYXL-HD3
WQNY-HD2
WQNY-HD3
WFIZ-FM
WFIZ-HD2

Market(a)

Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY

2014
Market
Ranking
By Radio
Revenue(b)
N/A
N/A
N/A
N/A
N/A

2014
Market
Ranking
By Radio
Market(b)
N/A
N/A
N/A
N/A
N/A

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

WKFN

KGMI
KPUG
KBAI
KICD
WKVT
WKBK
WZBK
WBCO
WNYY
WHCU

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

30
40
72
72
79
79
79
79
N/A
94
N/A
114
N/A
164
164
195
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 Format

Sports
Progressive Talk
News Talk
Contemporary Hits
Classic Hits/Oldies

Christian
Adult Standards
Adult Standards/Sports
Christian
News/Talk
News/Talk/Sports
News/Talk/Sports
News/Talk/Sports
News/Talk
News/Talk
News/Talk
News/Talk
News/Talk
Sports/Talk
Sports/Talk
News/Talk
News/Talk
Sports Talk
Classic Hits

38
43
73
73
91
91
91
91
N/A
92
N/A
199
N/A
159
159
264
N/A
N/A
N/A

N/A

Sports/Talk

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

News/Talk
Sports/Talk
Progressive Talk
News/Talk
News/Talk
News/Talk
Sports Talk
Adult Standards
Progressive Talk
News/Talk

Target
Demographics

Men 25 − 54
Adults 35+
Adults 35+
Adults 18 − 34
Adults 35+

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+

(a) Actual city of license may differ from metropolitan market actually served.
(b) Derived from Investing in Radio 2014 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, 2015:

Station

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

Market(a)

Joplin, MO − Pittsburg, KS
Joplin, MO − Pittsburg, KS
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX
Victoria, TX

2014 Market
Ranking by
Number of TV
Households(b)

151
151
203
203
203
203
203
203
203

Station
Affiliate

CBS
FOX
ABC
FOX
NBC
CBS
Univision
Telemundo
Cozi TV

Fall 2014
Station
Ranking
(by # of viewers)(b)

1
3
N/S
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 2014 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-two of our radio stations and one radio information network. The Television segment
includes two markets and consists of four television stations and ﬁve low power television (‘‘LPTV’’) stations.
For more information regarding our reportable segments, see Note 14 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, one Telemundo affiliate and one Cozi TV
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 $127,214,000 or 87% of our gross revenue for the year ended December 31, 2014
(approximately $122,400,000 or 87% in ﬁscal 2013 and approximately $124,700,000 or 87% in ﬁscal 2012)
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 2014 was approximately $19,074,000 or 13% of our
gross revenue (approximately $18,904,000 or 13% in ﬁscal 2013 and approximately $18,084,000 or 13% in
ﬁscal 2012).

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, 2014, we had approximately 761 full-time employees and 325 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 rarely
exercised 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

Market(1)

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

Power
(Watts)(2)

Expiration Date of
FCC Authorization

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

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, 2020
October 1, 2019
October 1, 2019
February 1, 2021
February 1, 2021
February 1, 2021
February 1, 2021
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
December 1, 2020
December 1, 2020
December 1, 2020

(footnotes follow tables)

Station
WQQL
WLRW
WIXY
WREE
WYXY
WNAX
KISM
KAFE
KICD
KMRR
WCVQ
WZZP
WVVR
WRND
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

Market(1)
Springﬁeld, IL
Champaign, IL
Champaign, IL
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

Power
(Watts)(2)

25,000
50,000
25,000
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

Expiration Date of
FCC Authorization
December 1, 2020
December 1, 2020
December 1, 2020
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, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
April 1, 2022
December 1, 2019
December 1, 2019
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
1,000
October 1, 2019
1,000
February 1, 2021
5,000
February 1, 2021
10,000
April 1, 2022
5,000
April 1, 2022
5,000
April 1, 2022
1,000
1,000
April 1, 2022
2,500(5) April 1, 2022
April 1, 2022
1,000
April 1, 2022
5,000
December 1, 2020
1,000
April 1, 2021
5,000
February 1, 2022
5,000

(footnotes follow tables)

Station
KPUG
KBAI
KICD
WRND
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) (Digital Ch 45)
KXTS-LD(4) (Digital Ch 19)
KMOL-LD(4) (Digital Ch 17)
KQZY-LP(4) (Digital Ch 33)(Off Air)

Market(1)
Bellingham, WA
Bellingham, WA
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

Power
(Watts)(2)

Expiration Date of
FCC Authorization
February 1, 2022
10,000
1,000(5) February 1, 2022
1,000
February 1, 2021
1,000(5) August 1, 2020
1,000(5) August 1, 2020
April 1, 2022
1,000
5,000
April 1, 2022
1,000(5) April 1, 2022
April 1, 2022
1,000
5,000
December 1, 2019
5,000(5) December 1, 2019
500(5) October 1, 2020
October 1, 2019
October 1, 2019
June 1, 2014(6)
June 1, 2014(6)

5,000
1,000
5,000
5,000

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

DTV 14,800
DTV 900,000
DTV 11,350
DTV 15,000
Analog 1,000
DTV 15,000
DTV 15,000
DTV 4,000

June 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 2, 2022

(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, WRND, 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 10 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, KMOL-LD and KQZY-LP are LPTV stations that operate as

‘‘secondary’’ stations (i.e., if they conﬂict with the operations of a ‘‘full power’’ television station, the
LPTV 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. The applications for renewal of license
of these stations are the subject of a petition to deny which has not yet been resolved by 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 (‘‘Qualifying
Market’’) where at least 20 independently owned media voices remain in the market after the combination is
effected. 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 LPTV 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). For more detailed information, see the discussion of recent FCC
action under ‘‘Time Brokerage Agreements.’’

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:

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).

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

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

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 markets 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.

(cid:129)

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.

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.

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. 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.

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
(But see the discussion in ‘‘Time Brokerage Agreements’’ concerning the disclosure of Joint Sales Agreements
(‘‘JSA’’) . In a Notice of Proposed Rulemaking released December 17, 2014, the FCC proposed to expand to
cable operators, direct satellite TV providers, broadcast radio licensees, and satellite radio licensees the
requirement that public inspection ﬁles be posted to the FCC’s online database, and action on that proposal is
pending.

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 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 December, 2014, the Commission adopted a Notice of Proposed
Rulemaking and Report and Order in connection with its 2014 Quadrennial Regulatory Review — Review of
the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996 (‘‘Report and Order’’). The Commission adopted a new attribution rule for
JSAs that applies when: (1) both broadcast television stations are licensed to the same DMA; and (2) the
brokering station is authorized to sell more than 15 percent of the weekly advertising time of the brokered
station. In these circumstances, the brokering station will have an attributable interest in the brokered station.
The rule became effective on June 19, 2014. Stations that have a television JSA signed before the release of
the Report and Order will have until December 19, 2016, to ensure that the agreement complies with the
Commission’s media ownership rules or to come into compliance with the media ownership rules by another
means. For example, if the local television ownership rule (47 C.F.R. §73.3555(b)) prohibits the brokering
station from having an attributable interest in more than one broadcast television station in the same DMA,

the licensees of the affected stations would either have to terminate the agreement or modify the agreement to
ensure that the brokering station is authorized to sell no more than 15 percent of the brokered station’s weekly
advertising time, or the licensee of the brokering station would have to take other steps to avoid having an
attributable interest in more than one broadcast television station in the market. Licensees that believe
application of the attribution rule to their particular circumstances would not serve the public interest may
seek a waiver of this rule. Likewise, licensees that believe application of the local television ownership rule
would adversely affect competition, diversity, or localism may seek a waiver of that rule. Television JSAs
entered into after the release of the Report and Order must comply with the Commission’s media ownership
rules at the time they are executed; the compliance period does not apply to any television JSA entered into
after the release of the Report and Order. Television JSAs that were entered into before the release of the
Report and Order but that expire before December 19, 2016, however, may be renewed even if the agreement
would violate the media ownership limits, provided that the renewal term does not extend beyond
December 19, 2016. The Report and Order requires that all attributable television JSAs be ﬁled with the
Commission. This ﬁling requirement became effective on October 28, 2014. We have complied with this
deadline.

We currently have a television TBA in the Victoria, Texas, market with Surtsey. 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. 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, which is considered by the FCC to be a JSA. 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. Unless the rule is voided or the time for
termination or modiﬁcation is extended, we would have to terminate or modify our JSA with Surtsey by
December 19, 2016.

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 and Low Power Television (‘‘LPTV’’) 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 LPTV 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.

LPTV and Class A Television Stations. Currently, the service areas of 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, and are
constructing a ﬁfth, KQZY-LP, 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 required the Commission to modify the rules authorizing the operation of LPFM, as
proposed in MM Docket No. 99-25. The FCC has promulgated rules consistent with this law. 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. 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. 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 and DARS will have an adverse impact on
our business.

Satellite Carriage of Local TV Stations. 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.

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. 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. 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.

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. 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 a Notice of Proposed
Rulemaking, released October 10, 2014, and 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. Congress passed and the President signed into law
the Middle Class Tax Relief and Job Creation Act of 2012, (codiﬁed at 47 U.S.C. §309(j)(8)(G) 47
U.S.C. §1452) (2012) (‘‘Spectrum Act’’). In a Report and Order, released June 2, 2014, in GN Docket 12-268,
the FCC adopted rules to implement the Spectrum Act, including rules to implement the auction of broadcast
television spectrum for use by other services. The FCC stated its mandate to protect full power and Class A
television facilities that already were operating pursuant to a license (or a pending application for a license to
cover a construction permit) on February 22, 2012, and to protect facilities in addition to those the statute
requires the FCC to protect, based on consideration of the potential impact on the FCC’s ﬂexibility in the
repacking process and its auction goals. The FCC concluded that protecting other categories of facilities,
including stations and television translator stations, would unduly constrain the FCC’s ﬂexibility in the
repacking process and undermine the likelihood of meeting its objectives for the incentive auction. To help
preserve the services provided by LPTV and TV translator stations, the FCC will open a special ﬁling window
for such stations that are displaced to select a new channel and will amend its rules to expedite the process for
displaced stations to relocate. The reverse and forward spectrum auctions will be integrated in a series of
stages. Each stage will consist of a reverse auction and a forward auction bidding process, and additional
stages will be run if necessary. Broadcasters will indicate through the pre-auction application process their
willingness to relinquish spectrum usage rights at the opening prices. Based on broadcasters’ collective
willingness, the initial spectrum clearing target will be set. Then the reverse auction bidding process will be
run to determine the total amount of incentive payments to broadcasters required to clear that amount of
spectrum. The forward auction bidding process will follow the reverse auction bidding process. Full power
and Class A station licensees will be eligible to participate in the reverse auction. They may bid to voluntarily
relinquish the spectrum usage rights associated with station facilities that are eligible for protection in the
repacking process. Bidders will have the three bid options speciﬁed by the Spectrum Act: (1) license
relinquishment; (2) reassignment from a UHF to a VHF channel; and (3) channel sharing. UHF-to-VHF
bidders may limit their bids to a high (channels 7 to 13) or low (channels 2 to 6) VHF channel. Bidders will
have the additional option to bid for reassignment from a high VHF channel to a low VHF channel. Potential
bidders will have to submit certiﬁed applications. Between the short-form application ﬁling deadline and the
announcement of the results of the reverse auction and the repacking process, all full power and Class A
licensees will be prohibited from communicating directly or indirectly any reverse or forward auction
applicant’s bids or bidding strategies to any other full power or Class A licensee or forward auction applicant.

The FCC will share forward auction proceeds with licensees that relinquish rights in the reverse auction as
soon as practicable following the successful conclusion of the incentive auction. The FCC will reimburse costs
reasonably incurred by television stations that are reassigned to new channels in the repacking process. The
FCC will grandfather existing broadcast station combinations that otherwise would no longer comply with the
media ownership rules as a result of the reverse auction. The Company has not made a decision on whether to
participate in the spectrum auction.

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.

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

70
58
60
57
66

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 2% in 2014 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, 2014 our long-term debt (including our guarantee of debt of Surtsey Media, LLC) was
approximately $36,078,000. 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 43%, 44% and 44% of our net operating
revenue for the years ended December 31, 2014, 2013 and 2012, 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, 2014, our FCC broadcasting licenses represented 45.2% 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 May Decide to Terminate ‘‘Grandfathered’’ Time Brokerage Agreements

The FCC attributes time brokerage agreements and local marketing agreements to the programmer under
its ownership limits if the programmer provides more than 15% of a station’s weekly broadcast programming.
However, TBAs entered into prior to November 5, 1996 are exempt from attribution for now.

The FCC will review these ‘‘grandfathered’’ TBAs in the future. During this review, the FCC may
determine to terminate the ‘‘grandfathered’’ period and make all TBAs fully attributable to the programmer. If
the FCC does so, we and Surtsey will be required to terminate the TBAs for station KVCT-TV unless the
FCC simultaneously change its duopoly rules to allow ownership of two stations in the applicable markets.

FCC Regulations May Restrict our Ability to Create Duopolies under Joint Service Agreements, which
Could Harm our Existing Operations

In our Joplin market, we have created a duopoly by entering into a joint service agreement. The FCC is

required to review its media ownership rules every four years and eliminate those rules it ﬁnds no longer
serve the ‘‘public interest, convenience and necessity.’’ In March 2014, the FCC initiated its 2014 quadrennial
review with the adoption of a Further Notice of Proposed Rulemaking (FNPRM). Concurrent with its adoption
of the FNPRM, the FCC adopted a rule making television JSAs attributable ownership interests to the seller
of advertising time in certain circumstances. Under this rule, where a party owns a full-power television
station in a market and sells more than 15% of the weekly advertising time for another, non-owned station in
the same market under a JSA, that party will be deemed to have an attributable ownership interest in the latter
station for purposes of the local television ownership rule. Parties to existing JSAs that do not comply with
the newly adopted rule were given two years from the effective date of this new rule to modify or terminate
their JSAs to come into compliance. Congressional legislation signed into law in late 2014 extended this
compliance period for an additional six months, and the compliance deadline is now December 19, 2016.
Although the FCC will consider waivers of the new JSA attribution rule, the FCC thus far has not granted
such a waiver and has provided little guidance on what factors must be present for a waiver to be granted.
This new rule may require us to amend or terminate our existing JSA with Surtsey. For further details on the
quadrennial review see ‘‘Federal Regulation of Radio and Television Broadcasting’’ in Item 1 of this
Form 10-K

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 may
in the future become subject to 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, 2015, Edward K. Christian, our President, Chief Executive Officer and Chairman, holds

approximately 63% 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 11 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.

Information technology failures or data security breaches could harm our business

Any internal technology error or failure impacting systems hosted internally or externally, or any large
scale external interruption in technology infrastructure we depend on, such as power, telecommunications or
the Internet, may disrupt our technology network. Any individual, sustained or repeated failure of technology
could impact our customer service and result in increased costs or reduced revenues. Our technology systems
and related data also may be vulnerable to a variety of sources of interruption due to events beyond our
control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers
and other security issues. While we have in place, and continue to invest in, technology security initiatives
and disaster recovery plans, these measures may not be adequate or implemented properly to prevent a
business disruption and its adverse ﬁnancial and consequences to our business’ reputation.

In addition, as a part of our ordinary business operations, we may collect and store sensitive data,
including personal information of our clients, listeners and employees. The secure operation of the networks
and systems on which this type of information is stored, processed and maintained is critical to our business
operations and strategy. Any compromise of our technology systems resulting from attacks by hackers or
breaches due to employee error or malfeasance could result in the loss, disclosure, misappropriation of or
access to clients’, listeners’, employees’ or business partners’ information. Any such loss, disclosure,
misappropriation or access could result in legal claims or proceedings, liability or regulatory penalties under
laws protecting the privacy of personal information, disrupt operations and damage our reputation, any or all
of which could adversely affect our business.

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, 2014 the studios and offices of 25 of our 28 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 6 months to 9 years. We own or lease our
transmitter and antenna sites, with lease terms that expire in 8 months to 75 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

The Company is subject to various outstanding claims which arise in the ordinary course of business and

to other legal proceedings. Management anticipates that any potential liability of the Company, which may
arise out of or with respect to these matters, will not materially affect the Company’s ﬁnancial statements.

Nielsen Audio, Inc. (formerly Arbitron, Inc.) (‘‘Nielsen’’) ﬁled suit against the Company and one of its
subsidiaries, Lakefront Communications, LLC, in the United States District Court in Delaware alleging they
have infringed certain of Nielsen’s copyrights. The case was dismissed on December 1, 2014 when we entered
into agreements to license historic Nielsen data in selected markets, in conjunction with entering into licenses
to receive Nielsen reports and services for future periods in those markets. The historic data that was licensed
will allow us to make historic period comparisons as we utilize the Nielsen reports and services in the future,
and the related license fee for the historic data was expensed in 2014.

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
2013:

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

2014:

High

Low

$51.61
$49.86
$51.99
$54.00

$55.00
$50.93
$43.92
$45.49

$33.23
$39.64
$43.48
$43.48

$42.28
$36.76
$33.58
$34.57

The closing price for the Company’s Class A Common Stock on March 3, 2015 as reported by the NYSE

MKT was $40.73. As of March 3, 2015, there were approximately 186 holders of record of the Company’s
Class A Common Stock, and one holder of the Company’s Class B Common Stock.

Dividends

On December 3, 2014 the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per

share and a special cash dividend of $1.20 per share on its Classes A and B Common Stock. This dividend
totaling $8.2 million was paid on December 29, 2014 to shareholders of record on December 15, 2014.

On September 23, 2014 the Company’s Board of Directors declared a quarterly cash dividend of $0.20
per share on its Classes A and B Common Stock. This dividend totaling $1.1 million was paid on October 17,
2014 to shareholders of record on October 3, 2014.

On June 30, 2014 the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per
share on its Classes A and B Common Stock. This dividend totaling $1.1 million was paid on July 25, 2014
to shareholders of record on July 11, 2014.

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, 2014, 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:
Employees’ 401(k) Savings and

Investment Plan . . . . . . . . . . . . . .
2003 Stock Option Plan . . . . . . . . . .
2005 Incentive Compensation Plan . .

Equity Compensation Plans Not
Approved by Stockholders:
None . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .

Total

(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

—
—

303,002(1)

$ —
$ —
$31.794(2)

—
303,002

427,196
—
458,883

—
886,079

Includes 89,832 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

The following table summarizes our repurchases of our Class A Common Stock during the three months
ended December 31, 2014. All shares repurchased during the quarter were from the retention of shares for the
payment of withholding taxes related to the vesting of restricted stock.

Period
October 1 − October 31, 2014 . . . . . .
November 1 − November 30, 2014 . . .
December 1 − December 31, 2014 . . .
. . . . . . . . . . . . . . . . . . . . . . .
Total

Total Number
of Shares
Purchased

—
6,165
—
6,165

Average Price
Paid per Share
$ —
$41.15
$ —
$41.15

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Program
—
253,690
—
253,690

Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the
Program(a)
$29,904,167
$29,650,477
$29,650,477
$29,650,477

(a) We have a Stock Buy-Back Program which allows us to purchase our Class A Common Stock. In

February 2013, our Board of Directors authorized an increase in the amount committed to the Buy-Back
Program from $60 million to approximately $75.8 million.

Performance Graph

COMMON STOCK PERFORMANCE

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

December 31, 2010, 2011, 2012, 2013 and 2014 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, 2009, 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 Communication Inc.

NYSE MKT Stock Market (US Companies)

Self-Determined Peer Group

S
R
A
L
L
O
D

700

600

500

400

300

200

100

520.16

351.37

147.34

2009

2010

2011

2012

2013

2014

Legend

Symbol

Total Return For:

(cid:4) Saga Communications Inc.
(cid:5) NYSE MKT Stock Market (US Companies)
▲ Peer Group

12/11

12/10

12/09
12/12
12/14
100.00 207.23 297.98 385.73 575.68 575.68 520.16
100.00 126.92 115.79 127.19 140.20 140.20 147.34
100.00 160.97 184.88 245.23 376.59 376.59 351.37

12/13

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 . . . . . .
Other operating (income) expense
. . . . . . . .
Impairment of Intangible Assets . . . . . . . . . .
Operating Income (Loss) From Continuing

2014

Years Ended December 31,
2013(1)(2)
2011(1)(2)
2012(1)(2)
(In thousands except per share amounts)

2010(1)(2)

$133,998
98,424
8,901
(1,210)
1,936

$129,478
92,977
8,172
—
2,033

$130,259
90,288
7,960
—
—

$125,273
90,929
7,590
—
—

$125,833
90,335
7,274
—
—

Operations . . . . . . . . . . . . . . . . . . . . . . .
Interest Expense . . . . . . . . . . . . . . . . . . . .

$ 25,947
$ 1,064

$ 26,296
1,305
$

$ 32,011
1,733
$

$ 26,754
3,420
$

$ 28,224
5,622
$

Net Income (Loss):

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

$ 14,904
—
$ 14,904

$ 15,050
223
$ 15,273

$ 18,060
(135)
$ 17,925

$ 12,885
(254)
$ 12,631

$ 15,464
(328)
$ 15,136

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

2.57
—
2.57
5,700

2.55
—
2.55

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

Equivalent Shares . . . . . . . . . . . . . . . . . .

5,753

5,745

5,672

5,656

5,641

Cash Dividends Declared Per Common

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

1.80

1.24

—

2014

2013

December 31,
2012
(In thousands)

2011

2010

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

$ 30,554
$ 55,187
$ 93,270
$192,044
$ 36,078
$115,245

$ 28,079
$ 56,337
$ 94,806
$193,224
$ 46,078
$109,701

$ 27,066
$ 58,462
$ 98,434
$197,330
$ 58,828
$104,209

$ 16,322
$ 60,622
$ 98,752
$190,334
$ 69,078
$ 92,975

$ 18,130
$ 62,753
$100,492
$199,803
$ 96,078
$ 80,078

(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-two of our radio stations and one radio information network. The Television segment
includes two markets and consists of four television stations and ﬁve 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, other operating (income)
expenses, and impairment of intangible assets). 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, 2014, 2013 and 2012, approximately 88%, 88% and 88%, 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 and
2014 we had signiﬁcant increases in revenue due the number of congressional, senatorial, gubernatorial and
local elections in most of our markets. 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 have also opened up a new set of digital inventory in the form of targeted display
advertising across 98% of the web. This gives our reps an expanded menu of services to offer our clients
while not impacting any of our on-air inventory. In addition to targeted display, we continue to offer an array
of digital services that include online promotions, mobile messaging, and email marketing.

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 streaming in each radio market.

During the years ended December 31, 2014, 2013 and 2012, our Columbus, Ohio; Des Moines, Iowa;

Manchester, New Hampshire; Milwaukee, Wisconsin and Norfolk, Virginia markets, when combined,
represented approximately 34%, 34%, and 35%, 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,
2013

2012

2014

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

7%
6%
5%
11%
5%

7%
7%
5%
10%
5%

7%
6%
6%
11%
5%

During the years ended December 31, 2014, 2013 and 2012, the radio stations in our ﬁve largest markets

when combined, represented approximately 32%, 39% and 40%, 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,
2013

2012

2014

7%
5%
7%
10%
3%

8%
5%
8%
11%
7%

8%
5%
8%
13%
6%

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

other operating (income) expenses, and impairment of intangible assets.

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, 2014, 2013 and 2012, approximately 83%, 82% and
85%, 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 10%, 9% and 9% of our net
operating revenues, and approximately 13%, 12% and 11% of our consolidated station operating income
(operating income plus corporate general and administrative expenses, depreciation and amortization, other
operating (income) expenses, and impairment of intangible assets) for the years ended December 31, 2014,
2013 and 2012, respectively.

% Increase
(Decrease)

(0.6)%
3.0%
2.7%
—
N/M

(17.9)%
(24.7)%
N/M
N/M

Results of Operations

The following tables summarize our results of operations for the three years ended December 31, 2014,

2013 and 2012.

Consolidated Results of Operations

2014 vs. 2013

2013 vs. 2012

Net operating revenue . . . . . . . . . . . . . $133,998 $129,478 $130,259
90,288
Station operating expense . . . . . . . . . . .
Corporate G&A . . . . . . . . . . . . . . . . .
7,960
Other operating (income) expense . . . . . .
Impairment of intangible assets
. . . . . . .
Operating income from continuing

98,424
8,901
(1,210)
1,936

92,977
8,172
—
2,033

Years Ended December 31,
2013

2014

2012

$ Increase
(Decrease)

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s and per share information)
$ 4,520
5,447
729
— (1,210)
(97)
—

3.5% $ (781)
2,689
5.9%
212
8.9%
—
2,033

N/M
(4.8)%

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

25,947
1,064
—
(71)

26,296
1,305
55
(106)

24,954
10,050

25,042
9,992

32,011
1,733
—
279

29,999
11,939

(349)
(241)
(55)
35

(88)
58

(1.3)% (5,715)
(428)
(18.5)%
55
N/M
(385)
33.0%

(0.4)% (4,957)
(1,947)
0.6%

(16.5)%
(16.3)%

14,904

15,050

18,060

(146)

(1.0)% (3,010)

(16.7)%

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

(135)
Net income . . . . . . . . . . . . . . . . . . . . $ 14,904 $ 15,273 $ 17,925
Earnings (loss) per share:
From continuing operations . . . . . . . . . . $
From discontinued operations
Earnings per share (fully diluted)

2.60 $
0.04
2.64 $

2.55 $
—
2.55 $

3.18
(0.02)
3.16

. . . . . . . .

. . . . . . $

223

—

(223)
$ (369)

N/M
358
(2.4)% $(2,652)

N/M
(14.8)%

$ (0.05)
(0.04)
$ (0.09)

(1.9)% $ (0.58)
N/M
0.06
(3.4)% $ (0.52)

(18.2)%
N/M
(16.5)%

Radio Broadcasting Segment

2014 vs. 2013

2013 vs. 2012

Years Ended December 31,
2013

$ Increase
(Decrease)
(In thousands, except %’s)
$ 3,809
Net operating revenue . . . . . . . . . . . . . $113,627 $109,818 $111,763
5,234
Station operating expense . . . . . . . . . . .
77,992
— (1,210)
Other operating (income) expense . . . . . .
(97)
—
. . . . . . .
Impairment of intangible assets
$ (118)
Operating income . . . . . . . . . . . . . . . . $ 27,734 $ 27,852 $ 33,771

85,167
(1,210)
1,936

79,933
—
2,033

2014

2012

% Increase
(Decrease)

$ Increase
(Decrease)

% Increase
(Decrease)

3.5% $(1,945)
1,941
6.5%
—
N/M
2,033
(4.8)%
(0.4)% $(5,919)

(1.7)%
2.5%
—
N/M
(17.5)%

Television Broadcasting Segment

2014 vs. 2013

2013 vs. 2012

Years Ended December 31,
2013

2012

2014

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s)
$711
213
$498

$18,496
12,296
$ 6,200

3.6%
1.6%
7.5%

$ Increase
(Decrease)

% Increase
(Decrease)

$1,164
748
$ 416

6.3%
6.1%
6.7%

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

$20,371
13,257
$ 7,114

$19,660
13,044
$ 6,616

N/M = Not meaningful

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

Year Ended December 31, 2014:

Radio

Television

Corporate
and Other

Consolidated

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

(In thousands)

$113,627
85,167
—
(1,210)
1,936

$20,371
13,257
—
—
—

$ —
—
8,901
—
—

$133,998
98,424
8,901
(1,210)
1,936

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

$ 27,734

$ 7,114

$(8,901)

$ 25,947

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, 2014 Compared to Year Ended December 31, 2013

Consolidated

For the year ended December 31, 2014, consolidated net operating revenue was $133,998,000 compared

with $129,478,000 for year ended December 31, 2013, an increase of $4,520,000 or 3.5%. Gross political
revenue, and gross local revenue increased $3,896,000, and $948,000, respectively, from 2013. The increase in
gross political revenue was due to a number of congressional, senatorial, gubernatorial and local elections in
most of our markets. The increase in local revenue was primarily attributable to improvements in our
Asheville, NC, Bellingham, WA, Ithaca, NY and Milwaukee, WI markets, partially offset by a decline in gross
local revenue in our Manchester, NH market. Gross interactive revenue decreased $427,000 for the year ended
December 31, 2014 as compared to 2013, primarily in our Milwaukee, WI market.

Station operating expense was $98,424,000 for the year ended December 31, 2014, compared with
$92,977,000 for the year ended December 31, 2013, an increase of $5,447,000 or 6%. The increase was
primarily attributable to license agreements entered into during the 3rd and 4th quarter of 2014 to license
historic Nielsen data in selected markets. Additionally in 2014, we had increases in health insurance, sales
commissions, programming salaries and property and casualty insurance of $510,000, $346,000, $288,000 and
$153,000, respectively.

Operating income from continuing operations for the year ended December 31, 2014 was $25,947,000

compared to $26,296,000 for the year ended December 31, 2013, a decrease of $349,000, or 1.3%. The
decrease was primarily a result of the increase in station operating expense, described above, combined with a
$729,000, or 9% increase in corporate general and administrative expense, offset by an increase in net

operating revenue, described above and other operating income of $1,210,000 in 2014 related to the gain on
the sale of four of our information networks (Michigan Radio Network, Michigan Farm Network, Minnesota
News Network and Minnesota Farm Network). Operating income for 2014 and 2013 also included a non-cash
impairment charge of $1,936,000 and $2,033,000, respectively in connection with our review of broadcast
licenses during the fourth quarter of each year (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 $14,904,000 ($2.55 per share on a fully diluted basis) for the year ended
December 31, 2014, compared with $15,273,000 ($2.64 per share on a fully diluted basis) for the year ended
December 31, 2013, a decrease of $369,000 or 2%. In 2014 we had a decrease in operating income from
continuing operations of $349,000, as described above, and an increase in our tax expense of $58,000 for
2014. These were partially offset by a decrease in interest expense of $241,000 and increase in other income
of $35,000. The decrease in interest expense was attributable to a decrease in average debt outstanding.

Radio Segment

For the year ended December 31, 2014, net operating revenue of the radio segment was $113,627,000
compared with $109,818,000 for the year ended December 31, 2013, an increase of $3,809,000 or 4%. Gross
political revenue, and gross local revenue increased $2,967,000, and $1,220,000, respectively, from 2013. The
increase in gross political revenue was due to a number of congressional, senatorial, gubernatorial and local
elections in most of our markets during 2014. The increase in local revenue was primarily attributable to
improvements in our Asheville, NC, Bellingham, WA, Ithaca, NY and Milwaukee, WI markets, partially offset
by a decline in gross local revenue in our Manchester, NH market. Gross interactive revenue decreased
$427,000 for the year ended December 31, 2014 as compared to 2013, primarily in our Milwaukee, WI
market.

Station operating expense for the radio segment was $85,167,000 for the year ended December 31, 2014,

compared with $79,933,000 for the year ended December 31, 2013, an increase of $5,234,000 or 7%. The
increase was primarily attributable to license agreements entered into during the 3rd and 4th quarter of 2014 to
license historic Nielsen data in selected markets. Additionally in 2014, we had increases in health insurance,
sales commissions, programming salaries and property and casualty insurance of $402,000, $310,000,
$289,000 and $127,000, respectively.

Operating income for the radio segment decreased $118,000 or less than 1% to $27,734,000 for the year

ended December 31, 2014, from $27,852,000 for the year ended December 31, 2013. The decrease was
primarily a result of the increase in station operating expense partially offset by the increase in net operating
revenue, described above and other operating income of $1,210,000 in 2014 related to the gain on the sale of
four of our information networks (Michigan Radio Network, Michigan Farm Network, Minnesota News
Network and Minnesota Farm Network). Operating income for 2014 and 2013 also included a non-cash
impairment charge of $1,936,000 and $2,033,000, respectively in connection with our review of broadcast
licenses during the fourth quarter of each year (see Note 2 in the accompanying notes to the consolidated
ﬁnancial statements).

Television Segment

For the year ended December 31, 2014, net operating revenue of our television segment was $20,371,000

compared with $19,660,000 for the year ended December 31, 2013, an increase of $711,000 or 4%. The
increase is primarily attributable to increases of $929,000 in gross political revenue and $238,000 in gross
retransmission revenue partially offset by decreases in gross local revenue of $272,000 and $99,000 in gross
national revenue. The increase in gross political revenue was due to a number of congressional, senatorial,
gubernatorial and local elections in most of our markets during 2014. The decrease in gross local revenue was
primarily attributable to our Victoria, TX market. The decrease in gross national revenue was due to a
decrease in our Joplin, MO market offset by an increase in our Victoria, TX market.

Station operating expense in the television segment for the year ended December 31, 2014 was

$13,257,000, compared with $13,044,000 for the year ended December 31, 2013, an increase of $213,000 or
2%. The increase in station operating expense was due to increased retransmission fees of $140,000 and an
increase in health insurance of $108,000. The retransmission cost increases are a direct result of increased
revenue in 2014.

Operating income in the television segment for the year ended December 31, 2014 was $7,114,000
compared with $6,616,000 for the year ended December 31, 2013, an increase of $498,000 or 8%. 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, 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

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.

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 $85 million of unused borrowing capacity under the Revolving Credit Facility at December 31,

2014. 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, 2014, 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, 2014) 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. We amended the agreement in
April 2014 to extend the due date of the loan to mature on May 1, 2017. At December 31, 2014, 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, 2014, 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 10 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, 2014, 2013 and 2012, we had net cash ﬂows from operating

activities of $25,416,000, $26,712,000 and $30,955,000, 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, 2014, we have repurchased 1.9 million shares of our Class A
Common Stock for $46.1 million. During the year ended December 31, 2014, approximately 6,000 shares
were retained for payment of withholding taxes for $254,000 related to the vesting of restricted stock.

Our capital expenditures, exclusive of acquisitions, for the year ended December 31, 2014 were

$5,524,000 ($5,152,000 in 2013). We anticipate capital expenditures in 2015 to be approximately $4.5 million
to $5.0 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, 2014:

Contractual Obligations:

Total

Less Than
1 Year

1 to 3 Years

4 to 5 Years

More Than
5 Years

Payments Due By Period

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

. .

Debt(2)

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

$36,078

$ —

2,654
8,871
40,966
—

787
1,427
15,471
—

(In thousands)
$ 1,078

$35,000

$ —

1,555
2,180
16,058
—

312
1,513
8,290
—

—
3,751
1,147
—

Obligations . . . . . . . . . . . . . .

$88,569

$17,685

$20,871

$45,115

$4,898

(1) Under our Credit Facility, the maturity on outstanding debt of $36.1 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 10 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 $16,623,000 in obligations under employment agreements and contracts with on-air
personalities, other employees, and our President, CEO, and Chairman, Edward K. Christian and
$24,343,000 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 2 − 3% of our outstanding receivables. The
effect of an increase in our allowance of 1% of our outstanding receivables as of December 31, 2014, from
2.0% to 3.0% or from $395,000 to $606,000 would result in a decrease in net income of $127,000, net of
taxes for the year ended December 31, 2014.

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 and Goodwill: As of December 31, 2014, we have recorded approximately
$86,762,000 in broadcast licenses and $362,000 in goodwill, which represents 45.3% 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 2014, we recognized a $1,936,000 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 in our Columbus, Ohio market. There were no
impairment indicators for goodwill. Please refer to Note 2 — Broadcast Licenses, Goodwill 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.

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, Goodwill 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, 2014, the Company would have recorded an additional broadcast license
impairment of approximately $2.2 million; had the fair values of each of our broadcasting licenses been lower
by 20% as of December 31, 2014, the Company would have recorded an additional broadcast license
impairment of approximately $5.6 million; and had the fair value of our broadcasting licenses been lower by
30% as of December 31, 2014, the Company would have recorded an additional broadcast license impairment
of approximately $11.8 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 2014 than they did during 2014, our interest
expense would increase, and income before taxes would decrease by $429,000. 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.

Recently Adopted Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an
Entity, to change the criteria for determining which disposals can be presented as discontinued operations and
to enhance the related disclosure requirements for discontinued operations. We early adopted ASU 2014-08 in
our fourth quarter of 2014 and applied the new guidance in accounting for the sale of the Michigan Radio
Network, the Michigan Farm Network, the Minnesota News Network and the Minnesota Farm Network. We
determined that the sale of our networks did not represent a strategic shift that will have a major effect on our
operations and ﬁnancial results, and accordingly it was not reported as a discontinued operation.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, ‘‘Disclosure of

Uncertainties About an Entity’s Ability to Continue as a Going Concern’’ (‘‘ASU 2014-15’’), which requires
management to evaluate, at each annual and interim reporting period, whether there are conditions or events
that raise substantial doubt about the entity’s ability to continue as a going concern and provide related
disclosures. ASU 2014-15 is effective for the ﬁrst interim period within annual reporting periods beginning
after December 15, 2016 and is not expected to have a material impact on the Company’s consolidated
ﬁnancial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This new

standard provides guidance for the recognition, measurement and disclosure of revenue resulting from
contracts with customers and will supersede virtually all of the current revenue recognition guidance under
GAAP. The standard is effective for the ﬁrst interim period within annual reporting periods beginning after
December 15, 2016. The Company is currently evaluating the impact of the provisions of this new standard
on our consolidated ﬁnancial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of Unrecognized Tax Beneﬁt When a Net

Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, 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 amendment was adopted on January 1, 2014 and did not have a material impact on our
consolidated ﬁnancial statements.

In February 2013, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards

Update (‘‘ASU’’) No. 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. This amendment was adopted on January 1, 2014 and did not 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, 2014 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 (2013) 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, 2014. Our internal control over ﬁnancial reporting as of December 31, 2014 has
been audited by Ernst & Young LLP, an independent registered public accounting ﬁrm, as stated in its report
which appears below.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
Saga Communications, Inc.

We have audited Saga Communications, Inc.’s internal control over ﬁnancial reporting as of

December 31, 2014, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 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, 2014, 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,
2014 and 2013, and the related consolidated statements of income, stockholders’ equity, and cash ﬂows for
each of the three years in the period ended December 31, 2014 of Saga Communications Inc. and our report
dated March 13, 2015 expressed an unqualiﬁed opinion thereon.

/s/ Ernst & Young LLP

Detroit, Michigan
March 13, 2015

Item 9B. Other Information

None.

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

The information required by this item is incorporated by reference to the information contained in our
Proxy Statement for the 2015 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

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statements

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, 2014 and 2013

— Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012

— Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012

— Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012

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, 2014 and 2013, and the related consolidated statements of income,
stockholders’ equity and cash ﬂows for each of the three years in the period ended December 31, 2014. 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, 2014 and 2013, and the
consolidated results of its operations and its cash ﬂows for each of the three years in the period ended
December 31, 2014, 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, 2014, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
March 13, 2015 expressed an unqualiﬁed opinion thereon.

As discussed in Note 1 to the consolidated ﬁnancial statements, the company elected to adopt an
amendment to the FASB Accounting Standards Codiﬁcation resulting from Accounting Standards Update
No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,
effective October 1, 2014. Our opinion is not modiﬁed with respect to this matter.

/s/ Ernst & Young LLP

Detroit, Michigan
March 13, 2015

Saga Communications, Inc.

Consolidated Balance Sheets
(In thousands, except par value)

December 31,

2014

2013

ASSETS
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance of $395 ($578 in 2013) . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets
Net property and equipment

$ 17,907
20,661
2,957
1,217
845
43,587
55,187

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

Other assets:

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

amortization of $11,796 ($12,205 in 2013)

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

86,762
326

88,460
—

6,182
$192,044

6,346
$193,224

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,133

1,962

Accrued expenses:

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

6,446 issued (6,409 in 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

843 issued and outstanding (816 in 2013)

. . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock (1,489 shares in 2014 and 1,488 in 2013, at cost) . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,788
2,756
1,356
—
13,033
23,786
36,078
805
3,097
76,799

—

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

—

8
52,496
91,178
(28,501)
115,245
$192,044

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

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Income

2014

Years Ended December 31,
2013
(In thousands, except per share data)
$129,478

2012

$130,259

$133,998

98,424
8,901
(1,210)
1,936
108,051
25,947

1,064
—
(71)
24,954

6,665
3,385
10,050
14,904
—
$ 14,904

2.57
—
2.57
5,700

2.55
—
2.55
5,753

1.80

92,977
8,172
—
2,033
103,182
26,296

1,305
55
(106)
25,042

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

90,288
7,960
—
—
98,248
32,011

1,733
—
279
29,999

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

Net operating revenue
Operating expenses (income):

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

Station operating expense . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . . . . . . .
Other operating (income) expense . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Impairment of intangible assets

Operating income from continuing operations

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

Other (income) expenses:

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

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

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2014, 2013 and 2012

Class A
Common Stock

Class B
Common Stock

Amount

Additional
Paid-In
Capital

Retained
Earnings

Treasury
Stock

Stockholders’
Equity

Balance at January 1, 2012 . . . . . .
Net income . . . . . . . . . . . . . . . . .
Net proceeds from exercised options . .
Dividends declared per common share .
Compensation expense related to

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

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

restricted stock awards . . . . . . . . .
Purchase of shares held in treasury . . .
401(k) plan contribution . . . . . . . . .
Balance at December 31, 2013 . . . .
Net income . . . . . . . . . . . . . . . . .
Conversion of shares from Class B to

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

restricted stock awards . . . . . . . . .
Purchase of shares held in treasury . . .
401(k) plan contribution . . . . . . . . .
Balance at December 31, 2014 . . . .

6,359

$64

797

6,369

$64

797

1
30
9

(1)
20

6,409

$64

816

3
27
7

(3)
30

6,446

$64

843

(In thousands)

$50,662 $ 70,831 $(28,590)
17,925

(7,010)

267

110
22

(80)
$51,061 $ 81,746 $(28,670)
15,273

(10,326)

275

135

(15)

(95)
245
$51,456 $ 86,693 $(28,520)
14,904

(10,419)

244

826

(254)
273
$52,496 $ 91,178 $(28,501)

(30)

$ 92,975
17,925
267
(7,010)

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

—
—
275
(10,326)

135
(95)
230
$109,701
14,904

244
(10,419)

826
(254)
243
$115,245

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

$ 14,904
—
14,904

$ 15,273
223
15,050

$ 17,925
(135)
18,060

2014

Years Ended December 31,
2013
(In thousands)

2012

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 expense (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,

Total adjustments

and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 networks . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of television station . . . . . . . . . . . . . . . . .
Acquisition of broadcast properties
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
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:

6,702
3,385
1,936
637
187
826
(1,281)
—
—
(208)
(129)
—
10

(1,521)
(627)

595
10,512
25,416
—
25,416

(5,524)
90
1,640
—
(903)
(11)
(4,708)
—
(4,708)

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)

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

(10,000)
(10,419)
—
(10)
(20,429)
279
17,628
$ 17,907

(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

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, 2014 we owned or operated ninety-two
radio stations, four television stations, ﬁve low-power television stations and one radio information network
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 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 43%, 44% and 44% of our net operating revenue for

the years ended December 31, 2014, 2013 and 2012, 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, 2014 and 2013.

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, 2014.

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,
2014, 2013 and 2012 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, 2014 . . . . . . . . . . . . . . . . . . .
December 31, 2013 . . . . . . . . . . . . . . . . . . .
December 31, 2012 . . . . . . . . . . . . . . . . . . .

$578
$577
$794

$139
$293
$134

$(322)
$(292)
$(351)

$395
$578
$577

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 received are 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 2014, 2013 and 2012.

Property and equipment consisted of the following:

Estimated
Useful Life

December 31,

2014

2013

(In thousands)

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

— $ 11,026
33,275
26,191
79,216
8,104
3,790
161,602
(106,415)
$ 55,187

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

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

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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $6,648,000,

$6,716,000 and $6,805,000, respectively.

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 99 broadcast licenses serving 25 markets, some of which are currently under renewal, while
others require renewal over the period of 2015 − 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, 2014, 2013 and 2012, we recognized interest expense related
to the amortization of debt issuance costs of $187,000, $204,000 and $231,000, 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. See Note 4 — Long-Term Debt.

At December 31, 2014 and 2013 the net book value of deferred costs was $636,000, and $823,000,
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, 2014, we had remaining
authorization of $29.7 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 2014, 2013 and 2012, we acquired 6,165 shares at an average price of $41.15 per
share, 2,179 shares at an average price of $43.98 per share and 2,924 shares at an average price of $27.30 per
share, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

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.

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.
Assets and liabilities related to the TBA’s/LMA’s are included in the accompanying Consolidated Balance
Sheets.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. Such costs amounted to $3,056,000,

$3,225,000 and $3,182,000 for the years ended December 31, 2014, 2013 and 2012, 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. Our effective tax rate is higher than the
federal statutory rate as a result of the inclusion of state taxes in the income tax amount.

Dividends

On December 3, 2014 the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per

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.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

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.

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

2014

Years Ended December 31,
2013
(In thousands, except per share data)

2012

Numerator:

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

$14,904

$15,273

$17,925

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

234
$14,670

135
$15,138

—
$17,925

Denominator:

Denominator for basic earnings per share-weighted

average shares

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

5,700

5,681

5,659

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

5,753
$ 2.57

2.55

5,745
2.66

2.64

5,672
3.17

3.16

The number of stock options outstanding that had an antidilutive effect on our earnings per share

calculation, and therefore have been excluded from dilutive earnings per share calculation, was 45,000, 13,000
and 93,000 for the years ended December 31, 2014, 2013, and 2012, respectively. 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.

Recently Adopted Accounting Pronouncements

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

our fourth quarter of 2014 and applied the new guidance in accounting for the sale of the Michigan Radio
Network, the Michigan Farm Network, the Minnesota News Network and the Minnesota Farm Network. We
determined that the sale of our networks did not represent a strategic shift that will have a major effect on our
operations and ﬁnancial results, and accordingly it was not reported as a discontinued operation.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, ‘‘Disclosure of

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This new

In July 2013, the FASB issued ASU No. 2013-11, Presentation of Unrecognized Tax Beneﬁt When a Net

In February 2013, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards

2. Broadcast Licenses, Goodwill and Other Intangible Assets

We evaluate our FCC licenses for impairment annually, or more frequently if events or changes in

circumstances indicate that the asset might be impaired. 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. 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.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

We also evaluate goodwill in each of its reporting units (reportable segment) for impairment annually, or
more frequently if certain circumstances are present. If the carrying amount of goodwill in a reporting unit is
greater than the implied value of goodwill determined by completing a hypothetical purchase price allocation
using estimated fair value of the reporting unit, the carrying amount of goodwill in that reporting unit is
reduced to its implied value.

We utilize independent appraisals in testing FCC licenses and goodwill for impairment when indicators of

impairment are present.

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.

Broadcast Licenses

We have recorded the changes to broadcast licenses for the years ended December 31, 2014 and 2013 as

follows:

Balance at January 1, 2013 . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . .

2014 Impairment Test

Radio

$80,773
132
(2,033)
$78,872
219
(1,936)
$77,155

Television
(In thousands)
$9,588
—
—
$9,588
19
—
$9,607

Total

$90,361
132
(2,033)
$88,460
238
(1,936)
$86,762

We completed our annual impairment test of broadcast licenses during the fourth quarter of 2014 and
determined that the fair value of the broadcast licenses were less than the amount reﬂected in the balance
sheet for one of the Company’s radio markets, Columbus, Ohio, and recorded non-cash impairment charge of
$1,936,000 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 2014 were primarily due to
declines in available market revenue, market revenue share, proﬁt margins and estimated long-term growth
rates in our Columbus, OH market.

The following table reﬂects certain key estimates and assumptions used in the impairment test in the
fourth quarter of 2014. The ranges for operating proﬁt margin and market long-term revenue growth rates vary
by market. In general, when comparing between 2014 and 2013: (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 1.6% lower
than previously projected for 2014.

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

Fourth
Quarter 2014
12.3% − 12.4%
20.8% − 36.4%
1.2% − 4.1%

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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

2. Broadcast Licenses, Goodwill 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.

2013 Impairment Test

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.

2012 Impairment Test

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%

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.

Goodwill

During the fourth quarter of 2014, the Company performed its annual impairment test of its goodwill in

accordance with ASC 350 and determined under the ﬁrst step that the fair value of the Radio reporting unit
was in excess of its carrying value (each segment is a reporting unit), and therefore, no impairment was
indicated. For the years presented there was no goodwill related to the television reporting unit.

We have recorded the changes to goodwill for each of the years ended December 31, 2014 and 2013 as

follows:

Balance at January 1, 2013 . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . .

Radio

$ —
—
$ —
326
$326

Television
(In thousands)
$—
—
$—
—
$—

Total

$ —
—
$ —
326
$326

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

Other Intangible Assets

We have recorded amortizable intangible assets at December 31, 2014 as follows:

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

Gross
Carrying
Amount

$ 3,861
5,862
1,766
$11,489

Accumulated
Amortization
(In thousands)
$ 3,861
5,613
1,609
$11,083

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

Gross
Carrying
Amount

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

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

Net
Amount

$ —
249
157
$406

Net
Amount

$ —
285
149
$434

Aggregate amortization expense for these intangible assets for the years ended December 31, 2014, 2013

and 2012, was $54,000, $52,000 and $51,000, respectively. Our estimated annual amortization expense for
the years ending December 31, 2015, 2016, 2017, 2018 and 2019 is $39,000, $39,000, $39,000, $39,000 and
$39,000, respectively.

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.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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,

2014

2013

(In thousands)

$30,000
5,000
1,078
36,078
—
$36,078

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

Future maturities of long-term debt are as follows:

Year Ending December 31,

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(In thousands)
$ —
—
1,078
35,000
—
—
$36,078

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.

We had $85 million of unused borrowing capacity under the Revolving Credit Facility at December 31,

Saga Communications, Inc.

Notes to Consolidated Financial Statements

4. Long-Term Debt − (continued)

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

(0.16925% at December 31, 2014, 0.169% at December 31, 2013) 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.

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

5. Supplemental Cash Flow Information

2014

Years Ended December 31,
2013
(In thousands)

2012

Cash paid during the period for:

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

$ 874
$7,319

Non-cash transactions:

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

$3,844
$3,636
91
$

$1,103
$7,134

$3,855
$3,844
$ 104

$1,559
$6,999

$4,188
$3,894
99
$

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.

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:

Deferred tax liabilities:

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

$ 7,727
18,134
621
26,482

$ 8,235
14,425
601
23,261

December 31,

2014

2013

(In thousands)

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes − (continued)

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

December 31,

2014

2013

(In thousands)

158
3,264
119
—
3,541
—
3,541
$ 22,941

845
$
(23,786)
$(22,941)

232
3,355
128
7
3,722
7
3,715
$ 19,546

$ 1,025
(20,571)
$(19,546)

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, 2014, we do not have a
valuation allowance for net deferred tax assets.

At December 31, 2014 and 2013, net deferred tax liabilities include a deferred tax asset of $2,082,000
and $2,089,000, 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, 2014 and 2013. See Note 7 — Stock-Based Compensation for
further discussion of stock-based compensation expense.

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

2014

Years Ended December 31,
2013
(In thousands)

2012

$ 5,540
1,125
6,665
3,385
$10,050

$10,050
—
$10,050

$ 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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes − (continued)

In addition, we recognized a tax expense of $10,000, a tax beneﬁt of $9,200 and a tax expense of
$25,000 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, 2014, 2013 and 2012, 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 . . . . . . . . . . . . . . . . . . . . . .

2014

Years Ended December 31,
2013
(In thousands)
$ 8,894
1,192
105
(51)
$10,140
148
$ 9,992

$ 8,630
1,249
178
(7)
$10,050
—
$10,050

2012

$10,486
1,356
42
(34)
$11,850
89
$11,939

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 2009. 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.

As of December 31, 2014 and 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, 2014 and 2013, we had no tax-related
interest or penalties and had $0 accrued at December 31, 2014 and 2013.

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’’), subsequently this plan was re-approved by stockholders in 2010. The changes in the
Second Restated 2005 Plan (i) increased the number of authorized shares by 233,334 shares of Common
Stock, (ii) extended 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,

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Stock-Based Compensation − (continued)

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
year ended December 31, 2012, we had $22,000 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 year ended December 31, 2012 was $9,000. The stock
options were fully expensed at December 31, 2012, therefore there was no compensation expense related to
stock options for the years ended December 31, 2014 and 2013.

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, and the

2003 Plan for the year ended December 31:

Outstanding at January 1, 2012 . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . .
Outstanding at December 31, 2013 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . .
Outstanding at December 31, 2014 . . . . . . . .
Vested and Exercisable at

Number
of Options
303,632
—
(9,796)
(33,176)
260,660
—
(8,910)
(17,963)
233,787
—
7,294
13,323
213,170

Weighted
Average
Exercise Price
$37.40
—
27.26
61.69
$34.69
—
29.41
54.35
$33.38
—
34.80
57.93
$31.79

December 31, 2014 . . . . . . . . . . . . . . . . .

213,170

$31.79

Weighted
Average
Remaining
Contractual
Term (Years)
3.6

Aggregate
Intrinsic Value
$ 135,886

3.0

$1,253,039

2.1

$4,058,035

1.2

$2,519,147

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Stock-Based Compensation − (continued)

The total intrinsic value of stock options exercised during the years ended December 31, 2014, 2013 and

2012 was $100,300, $155,500, and $72,200, respectively. Cash received from stock options exercised during
the years ended December 31, 2014, 2013 and 2012 was $291,600, $311,500 and $287,600, respectively.

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

and the 2003 Plan for the year ended December 31:

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

There were no options granted during 2014 and 2013.

Number
of Options
9,283
—
(9,283)
—
—

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

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

Outstanding at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested and outstanding at December 31, 2014 . . . . . . . . . . . . .

Weighted average remaining contractual life (in years) . . . . . . . . . .

Weighted
Average
Grant Date
Fair Value
$19.61
—
20.82
17.97
$17.97
46.51
17.97
—
$46.51
38.11
46.51
46.51
$41.20

Shares
13,212
—
(7,641)
(40)
5,531
50,062
(5,531)
—
50,062
56,756
16,529
457
89,832

7.0

The weighted average grant date fair value of restricted stock that vested during 2014, 2013 and 2012

was $769,000, $99,000 and $159,000, respectively. The net value of unrecognized compensation cost related
to unvested restricted stock awards aggregated $3,526,000, $2,210,000 and $16,000 at December 31, 2014,
2013 and 2012, respectively.

For the years ended December 31, 2014, 2013 and 2012 we had $826,000, $135,000 and $110,000,
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, 2014, 2013 and 2012 was $330,000, $53,000 and
$45,000, 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
$7,000, $5,000 and $12,000 in 2014, 2013 and 2012, respectively. The Company’s discretionary contribution
to the plan was approximately $260,000 $240,000 and $230,000 for the years ended December 31, 2014, 2013
and 2012, respectively.

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, 2014, 2013 and 2012
was $123,000, $193,000 and $126,000, 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. Acquisitions and Dispositions

We actively seek and explore opportunities for expansion through the acquisition of additional broadcast
properties. The consolidated statements of income include the operating results of the acquired stations from
their respective dates of acquisition. All acquisitions were accounted for as purchases and, accordingly, the
total purchase consideration was allocated to the acquired assets and assumed liabilities based on their
estimated fair values as of the acquisition dates. The excess of the consideration paid over the estimated fair
value of net assets acquired have been recorded as goodwill, which is deductible for tax purposes. The
Company accounts for acquisition under the provisions of FASB ASC Topic 805, Business Combinations.

Management assigned fair values to the acquired property and equipment through a combination of cost

and market approaches based upon each speciﬁc asset’s replacement cost, with a provision for depreciation,
and to the acquired intangibles, primarily an FCC license, based on the Greenﬁeld valuation methodology, a
discounted cash ﬂow approach.

On January 31, 2014, we acquired one FM station (WFIZ-FM) and three FM Translators serving the

Ithaca, New York market for approximately $720,000. We ﬁnanced this transaction through funds generated
from operations. The proforma results of operations for the acquisition of WFIZ-FM are not material to our
ﬁnancial statements and as such are not presented.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. Acquisitions and Dispositions − (continued)

The ﬁnal allocation of the purchase price is as follows:

Fair Value
(in thousands)

Assets Acquired:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
Broadcast licenses-Radio segment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, deferred costs and investments . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill-Radio segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 45
425
174
3
647
73
$720

On February 28, 2014 we acquired an FM translator serving the Jonesboro, Arkansas market for
approximately $35,000, of which $7,500 was allocated to broadcast licenses and $27,500 was allocated to
goodwill.

On May 9, 2014 we acquired an FM translator serving the Clarksville, Tennessee market for

approximately $30,000, of which $7,500 was allocated to broadcast licenses and $22,500 was allocated to
goodwill.

On May 14, 2014 we acquired an FM translator serving the Portland, ME market for approximately

$44,750, of which $7,500 was allocated to broadcast licenses and $37,250 was allocated to goodwill.

On May 16, 2014 we acquired two FM translators serving the Asheville, NC market for approximately

$100,000, of which $15,000 was allocated to broadcast licenses and $85,000 was allocated to goodwill.

On June 16, 2014 we acquired an FM translator serving the Des Moines, IA market for approximately

$87,500, of which $7,500 was allocated to broadcast licenses and $80,000 was allocated to goodwill.

On November 4, 2014 we acquired an LPTV servicing the Victoria, TX market for approximately

$18,500, which was allocated to broadcast licenses.

On December 2, 2014, we sold the Michigan Radio Network, the Michigan Farm Network, the

Minnesota News Network and the Minnesota Farm Network, for approximately $1,640,000. The net assets of
these networks approximated $430,000, and as such recognized a gain of approximately $1,210,000 that is
included in Other operating (income) expenses in our Consolidated Statements of Income. The proforma
results of operations for the sale of these networks is not material to our ﬁnancial statements and as such are
not presented. These radio networks have historically been presented within our radio segment. The radio
networks did not meet the criteria of discontinued operations.

10. 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.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Related Party Transactions − (continued)

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, 2014 his average annual
compensation, as deﬁned by the employment agreement was approximately $1,460,000.

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 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. On December 2, 2014, Mr. Christian
agreed to defer approximately $100,000 of his 2015 salary to be paid 100% on January 8, 2016.

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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Related Party Transactions − (continued)

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.

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, 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 2014 and 2013 we paid
Surtsey Media fees of approximately $3,600 and $3,400 per month, respectively 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,
2014, 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, 2014, 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 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 2014 and 2013 we paid fees of
approximately $4,800 and $4,500 per month, respectively, 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, $6,000, and $10,000 during the years ended December 31, 2014, 2013 and
2012, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Related Party Transactions − (continued)

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.

11. 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
six members at December 31, 2014. 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

12. Commitments and Contingencies

Leases

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

the year ended December 31, 2014 was $1,503,000 ($1,394,000 and $1,400,000 for the years ended
December 31, 2013 and 2012, respectively).

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

December 31, 2014 (in thousands):

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,427
1,169
1,011
868
645
3,751
$8,871

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, 2014 (in thousands):

Amounts due within one year (included in accounts payable) . . . . . . . . . . . . . . . .

$ 642
488
237
36
20
24
$1,447
642
$ 805

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.

13. 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

13. 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 2014, as a result of our annual impairment test, the Company wrote down

broadcast licenses with a carrying value of $15,218,000 to their fair value of $13,282,000, resulting in a
non-cash impairment charge of $1,936,000, which is included in net income for the year ended December 31,
2014. 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.)

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.)

14. 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-two of our radio stations and

one radio information network. The Television segment includes two markets and consists of four television
stations and ﬁve 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, 2014:
Net operating revenue . . . . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . .
Other operating (income) expense . . . . . . . . . . . . .
Impairment of intangible assets
. . . . . . . . . . . . . .
Operating income (loss) from continuing

$113,627
85,167
—
(1,210)
1,936

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

$ 27,734

Depreciation and amortization . . . . . . . . . . . . . . .

5,023

. . . . . . . . . . . . . . . . . . . . . . . .
Capital additions
. . . . . . . . . . . . . . . . . . . .
Broadcast licenses, net
Total assets at December 31, 2014 . . . . . . . . . . . .

$
3,856
$ 77,155
$142,068

$20,371
13,257
—
—
—

$ 7,114

$ 1,411

$
929
$ 9,607
$22,509

$ —
—
8,901
—
—

$ (8,901)

268

$
739
$ —
$27,467

$133,998
98,424
8,901
(1,210)
1,936

$ 25,947

6,702

$
5,524
$ 86,762
$192,044

Saga Communications, Inc.

Notes to Consolidated Financial Statements

14. Segment Information − (continued)

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

$109,818
79,933
—
2,033

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

$ 27,852

Depreciation and amortization . . . . . . . . . . . . . . .

Capital additions

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

5,119

3,884

Broadcast licenses, net

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

$ 78,872

Total assets at December 31, 2013 . . . . . . . . . . . .

$143,927

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
$

15. Quarterly Results of Operations (Unaudited)

$19,660
13,044
—
—

$ 6,616

$ 1,421

872

$ 9,588

$23,274

$18,496
12,296
—

$ 6,200
$ 1,411
977
$

$ —
—
8,172
—

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

$ (8,172)

$ 26,296

228

396

$ —

$26,023

$ —
—
7,960

$ (7,960)
225
$
46
$

6,768

5,152

$ 88,460

$193,224

$130,259
90,288
7,960

$ 32,011
6,858
$
4,809
$

March 31,

June 30,

2014

2013

2014

2013

September 30,
2013
2014

December 31,

2014

2013

Net operating revenue . . . . . . . . $29,423
22,947
Station operating expenses . . . . . .
2,153
Corporate G&A . . . . . . . . . . . .
—
Other operating (income) expense .
Impairment of intangible assets . . .
—
Operating income from continuing

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

4,323

(In thousands, except per share data)

$28,957
22,088
1,948
—
—

$33,831
23,499
2,120
—
—

$33,832
23,493
1,982
—
—

$34,373
26,366
2,307
—
—

$32,929
23,598
2,051

$36,371
25,612
2,321
— (1,210)
1,936
—

$33,760
23,798
2,191
—
2,033

4,921

8,212

8,357

5,700

7,280

7,712

5,738

Other (income) expenses:

Interest expense . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . .
Income from continuing operations
before tax . . . . . . . . . . . . . .
Income tax provision . . . . . . . . .
Income from continuing operations,
net of tax . . . . . . . . . . . . . .

Income (loss) from discontinued

272
(15)

4,066
1,627

358
25

4,538
1,812

272
(30)

7,970
3,193

357
66

7,934
3,130

268
7

5,425
2,180

308
(144)

252
(33)

7,116
2,820

7,493
3,050

282
2

5,454
2,230

2,439

2,726

4,777

4,804

3,245

4,296

4,443

3,224

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

—
Net income . . . . . . . . . . . . . . . $ 2,439

223
$ 2,949

—
$ 4,777

—
$ 4,804

—
$ 3,245

—
$ 4,296

—
$ 4,443

—
$ 3,224

Saga Communications, Inc.

Notes to Consolidated Financial Statements

15. Quarterly Results of Operations (Unaudited) − (continued)

March 31,

June 30,

2014

2013

2014

2013

September 30,
2013
2014

December 31,

2014

2013

(In thousands, except per share data)

Basic earnings (loss) per share:
. . .
From continuing operations
. .
From discontinued operations
Earnings per share . . . . . . . . .

$ .43
—
$ .43

Weighted average common shares .

5,690

Diluted earnings (loss) per share:
. . .
From continuing operations
From discontinued operations
. .
Diluted earnings per share . . . . . .

$ .42
—
$ .42

Weighted average common and

.48
.04
.52

5,673

.47
.04
.51

.83
—
.83

5,699

.82
—
.82

.85
—
.85

.56
—
.56

5,683

5,699

.84
—
.84

.56
—
.56

.76
—
.76

.77
—
.77

.56
—
.56

5,686

5,709

5,686

.75
—
.75

.76
—
.76

.56
—
.56

common equivalent shares . . . .

5,757

5,738

5,754

5,745

5,742

5,754

5,757

5,751

During the fourth quarter of 2014, the Company recognized a gain on the sale of four of our information
networks (Michigan Radio Network, Michigan Farm Network, Minnesota News Network and Minnesota Farm
Network) of $1,210,000 and a pre-tax impairment charge of $1,936,000 to reduce the carrying value of certain
radio broadcast licenses to their estimated fair value.

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.

16. Litigation

The Company is subject to various outstanding claims which arise in the ordinary course of business and

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 13, 2015.

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 13, 2015.

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)
3(b)(6)
3(c)(4)
4(a)(8)

4(b)(9)
10(a)(1)
10(b)(2)
10(c)(7)
10(d)(10)

10(e)(11)

10(f)(11)

10(g)(8)
10(h)(5)
10(i)(5)
10(j)(5)
10(k)(5)
21*
23.1*
31.1*

31.2*

32*

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.

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Deﬁnition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

*
(1) 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.

(2) Exhibit ﬁled with the Company’s Form 10-Q for the quarter ended June 30, 2003 and incorporated by

reference herein.

(3) 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.

(4) Exhibit ﬁled with the Company’s Form 10-K for the year ended December 31, 2007 and incorporated by

reference herein.

(5) Exhibit ﬁled with the Company’s Form 8-K ﬁled on January 4, 2008 and incorporated by reference

herein.

(6) Exhibit ﬁled with the Company’s Form 8-K ﬁled on January 29, 2009 and incorporated by reference

herein.

(7) Exhibit ﬁled with the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders and

incorporated by reference herein.

(8) Exhibit ﬁled with the Company’s Form 10-Q for the quarter ended June 30, 2011 and incorporated by

reference herein.

(9) Exhibit ﬁled with the Company’s Form 8-K ﬁled on May 31, 2013 and incorporated by reference herein.
(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.

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 11, 2015 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
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