Saga Communications, Inc. Annual Report 2017

FY2017 Annual Report · Saga Communications, Inc.

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2017 Annual Report

2017 Annual Letter

To our fellow shareholders:

Every now and then I am introduced to someone who knows, kind of, who I am and what I do and they
instinctively ask, ‘‘How are things at Saga?’’ (they pronounce it ‘‘say-gah’’). I am polite and correct their
pronunciation (‘‘sah-gah’’) as I am proud of the word and its history. This is usually followed by, ‘‘What is a
‘‘sah-gah?’’ My response is that there are several deﬁnitions — a common one from 1857 deems a ‘‘Saga’’ as
‘‘a long, convoluted story.’’ The second one that we prefer is ‘‘an ongoing adventure.’’ That’s what we are.

Next they ask, ‘‘What do you do there?’’ (pause, pause). I, too, pause, as by saying my title doesn’t really tell
what I do or what Saga does. In essence, I tell them that I am in charge of the wellness of the Company and
overseer and polisher of the multiple brands of radio stations that we have.

Then comes the question, ‘‘Radio stations are brands?’’ ‘‘Yes,’’ I respond. ‘‘A consistent allusion can become
a brand. Each and every one of our radio stations has a created personality that requires ongoing care. That is
one of the things that differentiates us from other radio companies.’’

We really care about the identity, ambiance, and mission of each and every station that belongs to Saga. We
have radio stations that have been on the air for close to 100 years and we have radio stations that have been
created just months ago. All stations in our portfolio must retain their long-term identities and additionally be
curated to maintain their visage for today.

This isn’t easy in today’s environment where brand maintenance is being neglected and challenged. First off,
you must distinguish the difference between a brand and a brand name. We must decide on a mission for the
radio station and create a brand name for that. Recently we created new formats for speciﬁc audiences, such
as ‘‘The Outlaw − Legends and Young Guns,’’ a music approach and niche country music format that creates
the environment of honky tonks and saloons. We now have this format on in Des Moines, Iowa; Asheville,
North Carolina; Clarksville, Tennessee; Jonesboro, Arkansas; and Springﬁeld, Illinois. We also have ‘‘Pure
Oldies’’ on the air in ﬁve markets, and our new EZ Favorites, a late 70’s-early 80’s soft adult contemporary
format, is airing in Des Moines, Iowa and Hilton Head, South Carolina.

So, we have the brand names and the missions which we meld together so that each station has a perceived,
untouchable value to the community -- that’s the branding part. We also need to make the community aware
that these stations are relevant and special and should become part of the fabric of their lives. It is surprising
to us that the relevance of brand management in all facets today is decreasing and diminishing in other
companies.

Why do we have to go through this? Because at Saga we believe that our effectiveness correlates to powerful
brands that are well curated with constant attention to branding. That’s why radio advertising works. We even
care about the creative process for our advertisers and suggest different copy for different environments.

There is no question. It is a tough environment and we are challenged to overcome advertising agencies’ new
push towards algorithmic marketing and quantiﬁable targeted reach. We know that our stations create an audio
environment of comfortability and trust. This trust follows through to our advertisers and their messages. Trust
engenders loyalty with the advertiser from long time consumers and also a level of comfortability with new
consumers.

Radio concentrates on the big picture and we want our clients to be with us for the next hundred years. Just
like the clients who have relied on our stations, I also salute these stations that have served their communities
and been on the air for close to a century — WNAX 96 years, KGMI 92 years, KRNT 83 years, WSVA
83 years, WHCU 96 years, WKBK 97 years, WFEA 86 years, WHMP 68 years, WGAN 80 years WZAN
93 years, WTAX 95 years, and KICD 76 years.

Now, a quick summary of 2017:

The year was quite a bit different from our normal years (if there is such a thing) as we sold our television
stations in Joplin, MO and Victoria, TX. These stations were great contributors to our ﬁnancial success over
the years but, as we saw the changes taking place in the television industry, it was time to turn them over to a
company that plans to continue to grow their television presence as we plan on our continued growth in radio.
We were able to redeploy $23 million of the sale proceeds immediately into purchasing radio stations in
Charleston and Hilton Head, SC. Both of these markets are growing rapidly and present the opportunity for us
to continue the growth of both heritage and developmental radio stations in these outstanding communities.

For the year net income increased $36.5 million to $54.7 million. Net revenue for the year was $118.2 million
and free cash ﬂow from operations was $20.1 million. Free cash ﬂow including both operations and the sale
of the television stations was approximately $50 million. Including the dividend paid on March 30, 2018,
Saga will have paid over $55 million in dividends since December 3, 2012.

If you now understand that, to us, our radio stations are alive and well and dedicated to being the best every
day, you understand our commitment as stewards of the brands. The passion for radio glows around us. There
is nothing convoluted about us, just a dedicated group of broadcasters on a continuing adventure − our
‘‘Saga.’’

As always, if you are in any of our markets, we sincerely invite you to contact our market manager and
arrange a personal visit. Expect further examples of how we work, why radio works for advertisers, and how
we intertwine ourselves with our communities.

Sincerely and Thank You,

Ed Christian
Chief Curator of SAGA

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, 2017
OR

□

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

For the transition period for

to
Commission ﬁle number 1-11588

SAGA COMMUNICATIONS, INC.

(Exact name of registrant as speciﬁed in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

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

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

48236
(Zip Code)

Registrant’s telephone number, including area code:
(313) 886-7070

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Class A Common Stock, $.01 par value

NYSE American

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. (cid:2)

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, or a smaller
reporting company. See the deﬁnitions of ‘‘large accelerated ﬁler,’’ ‘‘accelerated ﬁler’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the
Exchange Act.

Large accelerated ﬁler □ Accelerated ﬁler (cid:2) Non-accelerated ﬁler □ Smaller Reporting Company □ Emerging growth company □

(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised ﬁnancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □
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,
2017 on the NYSE American: $229,017,827.

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 2, 2018 was 5,042,709 and 898,633, respectively.

Portions of the Proxy Statement for the 2018 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.

DOCUMENTS INCORPORATED BY REFERENCE

Saga Communications, Inc.
2017 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,’’ ‘‘expects’’, ‘‘anticipates,’’ ‘‘guidance,’’ 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 2018 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,
global, U.S. and local economic conditions, our ability to successfully integrate acquired stations, regulatory
requirements, new technologies, natural disasters, terrorist attacks, information technology and cybersecurity
failures and data security breaches. 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. On May 9, 2017 we entered into an agreement to sell our Joplin, Missouri and Victoria, Texas
television stations and subsequently closed on this transaction on September 1, 2017. The television stations
that were sold constituted our entire television segment. The historical results of operations for the television
stations are presented as discontinued operations for all periods presented (see Note 3). As a result of the sale
of our television stations and those stations being reported as discontinued operations we only have one
reportable segment at December 31, 2017. Unless indicated otherwise, the information in the Notes to
Consolidated Financial Statements relates to our continuing operations. As of February 28, 2018, we owned
seventy-ﬁve FM and thirty-three AM radio stations serving twenty-six markets, including Bellingham,
Washington; Columbus, Ohio; Norfolk, Virginia; Milwaukee, Wisconsin; Manchester, New Hampshire; and
Des Moines, Iowa.

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

February 28, 2018:

Station
FM:
WKLH
WHQG
WJMR
WNRG
WSNY
WNND
WNNP
WLVQ
WVMX
WNOR
WAFX
KSTZ
KSTZ-HD2
KIOA
KAZR
KAZR-HD2
KMYR
KIOA-HD2
WMGX
WYNZ
WPOR
WCLZ
WAVF
WCKN
WMXZ
WMXZ-HD2
WXST
WAQY
WLZX
WZID
WMLL

Market(a)

Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Columbus, OH
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
Des Moines, IA
Des Moines, IA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Charleston, SC
Charleston, SC
Charleston, SC
Charleston, SC
Charleston, SC
Springﬁeld, MA
Springﬁeld, MA
Manchester, NH
Manchester, NH

(footnotes follow tables)

2017
Market
Ranking
By Radio
Revenue(b)

2017
Market
Ranking
By Radio
Market(b)

Station Format

Target
Demographics

Men 18 − 49
Men 35 − 64

Men 40 − 64
Men 18 − 49

Classic Rock
Rock
Urban Adult Contemporary Women 25 − 54
Adults 18 − 34
Contemporary Hits
Women 25 − 54
Adult Contemporary
Adults 35 − 64
Classic Hits
Adults 35 − 64
Classic Hits
Classic Rock
Men 40 − 64
Hot Adult Contemporary Women 25 − 44
Rock
Classic Rock
Hot Adult Contemporary Women 25 − 44
Adults 45 − 64
Country Legends
Adults 45 − 64
Classic Hits
Men 25 − 49
Rock
Oldies/Classic Hits
Adults 45+
Soft Adult Contemporary Women 25 − 54
Adults 18 − 34
Contemporary Hits
Hot Adult Contemporary Women 25 − 44
Adults 45 − 64
Classic Hits
Adults 25 − 54
Country
Adults 25 − 54
Adult Album Alternative
Adults 25 − 54
Adult Contemporary
Country
Adults 25 − 54
Hot Adult Contemporary Women 25 − 44
Urban Hits
Adults 18 − 34
Urban Adult Contemporary Adults 25 − 54
Classic Rock
Alternative Rock
Adult Contemporary
Classic Hits

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

30
30
30
30
33
33
33
33
33
41
41
66
66
66
66
66
66
66
74
74
74
74
92
92
92
92
92
97
97
116
116

41
41
41
41
37
37
37
37
37
45
45
71
71
71
71
71
71
71
95
95
95
95
78
78
78
78
78
96
96
198
198

Station
WZID-HD2
WZID-HD3
WOXL
WTMT
WTMT-HD2
WTMT-HD3
WOXL-HD2
WSIG
WQPO
WQPO-HD3
WMQR
WWRE
WNAX
WWWV
WQMZ
WCNR
WCVL
WLHH
WOEZ
WVSC
WVSC-HD2
KISM
KAFE
WKVT
WRSY
WQEL
WLRW
WREE
WYXY
WIXY
WIXY-HD2
WIXY-HD3
WLRW-HD2
WCVQ

WVVR

WZZP

WRND

WCVQ-HD2

WCVQ-HD3

WHAI
WPVQ

Market(a)
Manchester, NH
Manchester, NH
Asheville, NC
Asheville, NC
Asheville, NC
Asheville, NC
Asheville, NC
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Yankton, SD
Charlottesville, VA
Charlottesville, VA
Charlottesville, VA
Charlottesville, VA
Hilton Head, SC
Hilton Head, SC
Hilton Head, SC
Hilton Head, SC
Bellingham, WA
Bellingham, WA
Brattleboro, VT
Brattleboro, VT
Bucyrus, OH
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL
Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Greenﬁeld, MA
Greenﬁeld, MA

2017
Market
Ranking
By Radio
Revenue(b)
116
116
154
154
154
154
154
168
168
168
168
168
180
190
190
190
190
246
246
246
246
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

2017
Market
Ranking
By Radio
Market(b)
198
198
158
158
158
158
158
251
251
251
251
251
258
206
206
206
206
222
222
222
222
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

Target
Demographics
Contemporary Hits
Adults 18 − 34
Classic Country
Adults 45 − 64
Adult Contemporary
Women 25 − 54
Classic Rock
Men 40 − 64
Classic Hits
Adults 45 − 64
Country Legends
Adults 45 − 64
Adult Album Alternative
Adults 25 − 54
Classic Country
Adults 35 − 64
Contemporary Hits
Women 18 − 34
Classic Rock
Male 40 − 64
Adult Contemporary
Female 25 − 44
Classic Hits
Adults 45 − 64
Country
Adults 25 − 54
Classic Rock
Men 40 − 64
Adult Contemporary
Women 25 − 54
Adult Album Alternative
Adults 25 − 54
Country
Adults 25 − 54
Classic Hits
Adults 45 − 64
Women 35 − 64
Adult Contemporary
Soft Adult Contemporary Women 35 − 64
Adults 45 − 64
Oldies/Classic Hits
Men 40 − 64
Classic Rock
Women 25 − 54
Adult Contemporary
Adults 40 − 64
Classic Hits
Adults 25 − 54
Adult Album Alternative
Classic Hits
Adults 40 − 64
Hot Adult Contemporary Women 25 − 44
Adults 40 − 64
Classic Hits
Adults 45 − 64
Classic Country
Adults 25 − 54
Country
Men 18 − 49
Rock
Adults 18 − 34
Contemporary Hits
Oldies/Classic Hits
Adults 45 − 64
Hot Adult Contemporary Women 25 − 54

N/A

Country

Adults 25 − 54

N/A

Rock

Men 18 − 49

N/A

Classic Hits

Adults 40 − 64

N/A

Contemporary Christian

Adults 25 − 54

N/A

Country Legends

Adults 45 − 64

N/A
N/A

Adult Contemporary
Country

Women 25 − 54
Adults 25 − 54

(footnotes follow tables)

Station
WIII
WQNY
WYXL
WYXL-HD2
WYXL-HD3
WFIZ
WFIZ-HD2
KEGI
KDXY
KJBX
KJBX-HD2
KDXY-HD2
KDXY-HD3
WKNE
WSNI
WINQ
WKNE-HD2
WKNE-HD3
KMIT
KMIT-HD2
KMIT-HD3
KUQL
WRSI
WLZX-HD2
KICD
KMRR
WYMG
WDBR
WQQL
WLFZ
WDBR-HD2
WDBR-HD3
AM:
WJYI
WJOI
KRNT
KPSZ
WGAN
WZAN
WBAE
WGIN
WSPO
WHNP
WFEA
WISE
WYSE
WSVA

Market(a)

Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Keene, NH
Keene, NH
Keene, NH
Keene, NH
Keene, NH
Mitchell, SD
Mitchell, SD
Mitchell, SD
Mitchell, SD
Northampton, MA
Northampton, MA
Spencer, IA
Spencer, IA
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL
Springﬁeld, IL

Milwaukee, WI
Norfolk, VA
Des Moines, IA
Des Moines, IA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Charleston, SC
Springﬁeld, MA
Manchester, NH
Asheville, NC
Asheville, NC
Harrisonburg, VA

(footnotes follow tables)

2017
Market
Ranking
By Radio
Revenue(b)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

30
41
66
66
74
74
74
74
92
97
116
154
154
168

2017
Market
Ranking
By Radio
Market(b)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

41
45
71
71
95
95
95
95
78
96
198
158
158
251

Station Format

Target
Demographics

Men 40 − 64
Adults 25 − 54
Women 25 − 54
Adults 25 − 54
Men 25 − 64
Adults 18 − 34
Adults 40 − 64
Men 40 − 64
Adults 25 − 54
Women 25 − 54
Adults 45 − 64
Adults 18 − 34
Men 35 − 64

Iconic Rock
Country
Adult Contemporary
Adult Album Alternative
Sports
Contemporary Hits
Oldies/Classic Hits
Classic Rock
Country
Adult Contemporary
Country Legends
Contemporary Hits
Sports ESPN
Hot Adult Contemporary Women 25 − 54
Women 25 − 44
Adult Contemporary
Adults 25 − 54
Country
Adults 25 − 54
Adult Album Alternative
Adults 45 − 64
Classic Country
Adults 25 − 54
Country
Women 25 − 54
Adult Contemporary
Men 18 − 64
Sports
Adults 45 − 64
Classic Hits/Oldies
Adults 25 − 54
Adult Album Alternative
Adults 18 − 34
Contemporary Hits
Adults 25 − 54
Country
Women 25 − 54
Adult Contemporary
Men 25 − 54
Classic Rock
Adults 18 − 34
Contemporary Hits
Adults 45 − 64
Classic Hits/Oldies
Adults 25 − 54
Country
Adults 45 − 64
Country Legends
Adults 45 − 64
Oldies/Classic Hits

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

Adults 25 − 54
Adults 45 − 64
Men 18 − 64
Adults 25 − 54
Adults 35 − 64
Men 18 − 64
Adults 35 − 64
Adults 35 − 64
Adults 25 − 54
Adults 35 − 64
Adults 35 − 64
Men 18 − 64
Men 18 − 64
Adults 35 − 64

2017
Market
Ranking
By Radio
Revenue(b)
168
180
190
190
N/A
N/A
N/A
N/A
N/A
N/A

2017
Market
Ranking
By Radio
Market(b)
251
258
206
206
N/A
N/A
N/A
N/A
N/A
N/A

Station Format

Sports ESPN
News/Talk
News/Talk
Sports Talk
News/Talk
Sports/Talk
Classic Hits
News/Talk
Classic Country
Classic Hits

Target
Demographics

Men 18 − 64
Adults 35 − 64
Adults 35 − 64
Men 18 − 64
Adults 35 − 64
Men 18 − 64
Adults 40 − 64
Adults 35 − 64
Adults 45 − 64
Adults 40 − 64

N/A

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

N/A

Sports/Talk ESPN

Men 18 − 64

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

News/Talk
Oldies/Classic Hits
News/Talk
News/Talk
Sports Talk
News/Talk
News/Talk
News/Talk

Adults 35 − 64
Adults 45 − 64
Adults 35 − 64
Adults 35 − 64
Men 18 − 64
Adults 35 − 64
Adults 35 − 64
Adults 35 − 64

Market(a)

Harrisonburg, VA
Yankton, SD
Charlottesville, VA
Charlottesville, VA
Bellingham, WA
Bellingham, WA
Bellingham, WA
Brattleboro, VT
Bucyrus, OH
Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Greenﬁeld, MA
Ithaca, NY
Ithaca, NY
Keene, NH
Keene, NH
Northampton, MA
Spencer, IA
Springﬁeld, IL

Station
WHBG
WNAX
WINA
WVAX
KGMI
KPUG
KBAI
WKVT
WBCO
WRND

WKFN

WHMQ
WNYY
WHCU
WKBK
WZBK
WHMP
KICD
WTAX

(a) Actual city of license may differ from metropolitan market actually served.
(b) Derived from Investing in Radio 2017 Market Report.

Strategy

Our strategy is to operate top billing radio 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.

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

operations. In many of our markets, the three or four most highly rated radio stations 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 Hits, Top 40, Country, Country Legends, Mainstream/Hot/Soft Adult Contemporary, Pure
Oldies, Classic Rock, and News/Talk. 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 owned and/or operated, prior to their sale, during 2017 were 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
selected available syndicated programming to maximize viewership. We also developed 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 eight 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 were 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 $124,809,000 or 87% of our gross revenue for the year ended December 31, 2017
(approximately $131,233,000 or 85% in ﬁscal 2016 and approximately $125,558,000 or 87% in ﬁscal 2015)
was generated from the sale of local advertising for both continuing operations and discontinued operations.
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 for both continuing operations and discontinued operations in ﬁscal
2017 was approximately $18,151,000 or 13% of our gross revenue (approximately $23,545,000 or 15% in
ﬁscal 2016 which includes $5,183,000 in national political sales or 3% of gross revenue and approximately
$18,368,000 or 13% in ﬁscal 2015).

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, 2017, we had approximately 683 full-time employees and 347 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. All the Company’s licenses have been renewed for their regular
terms. In the future, we intend to timely ﬁle renewal applications, as required for the Company’s stations. In
January 2018, the FCC designated the renewal applications of two AM radio stations for hearing based on the
stations’ records of extended periods of silence during and following their respective license renewal terms.
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:
WOXL
WTMT
KISM
KAFE
WRSY
WKVT
WQEL
WLRW
WIXY
WREE
WYXY
WAVF
WCKN
WMXZ
WXST
WWWV
WQMZ
WCNR
WCVL
WCVQ
WZZP

(footnotes follow tables)

Power
(Watts)(2)

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

Expiration Date of
FCC Authorization

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

Market(1)

Asheville, NC
Asheville, NC
Bellingham, WA
Bellingham, WA
Brattleboro, VT
Brattleboro, VT
Bucyrus, OH
Champaign, IL
Champaign, IL
Champaign, IL
Champaign, IL
Charleston, SC
Charleston, SC
Charleston, SC
Charleston, SC
Charlottesville, VA
Charlottesville, VA
Charlottesville, VA
Charlottesville, VA
Clarksville, TN/Hopkinsville, KY
Clarksville, TN/Hopkinsville, KY

Station
WVVR
WRND
WSNY
WNNP
WNND
WVMX
WLVQ
KSTZ
KIOA
KAZR
KMYR
WHAI
WPVQ
WMQR
WQPO
WSIG
WWRE
WOEZ
WLHH
WVSC
WYXL
WQNY
WIII
WFIZ
KEGI
KDXY
KJBX
WKNE
WSNI
WINQ
WZID
WMLL
WKLH
WHQG
WNRG
WJMR
KMIT
KUQL
WNOR
WAFX
WRSI
WPOR
WCLZ
WMGX
WYNZ
KICD
KMRR
WLZX
WAQY
WYMG
WLFZ

(footnotes follow tables)

Power
(Watts)(2)
100,000
6,000
50,000
6,000
6,000
6,000
50,000
100,000
100,000
100,000
100,000
3,000
3,000
25,000
50,000
25,000
6,000
25,000
25,000
25,000
50,000
50,000
50,000
6,000
50,000
25,000
6,000
50,000
6,000
6,000
50,000
6,000
50,000
50,000
6,000
6,000
100,000
100,000
50,000
100,000
3,000
50,000
50,000
50,000
25,000
100,000
25,000
6,000
50,000
50,000
50,000

Expiration Date of
FCC Authorization

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

Market(1)
Clarksville, TN/Hopkinsville, KY
Clarksville, TN/Hopkinsville, KY
Columbus, OH
Columbus, OH
Columbus, OH
Columbus, OH
Columbus, OH
Des Moines, IA
Des Moines, IA
Des Moines, IA
Des Moines, IA
Greenﬁeld, MA
Greenﬁeld, MA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Hilton Head Island, SC
Hilton Head Island, SC
Hilton Head Island, SC
Ithaca, NY
Ithaca, NY
Ithaca, NY
Ithaca, NY
Jonesboro, AR
Jonesboro, AR
Jonesboro, AR
Keene, NH
Keene, NH
Keene, NH
Manchester, NH
Manchester, NH
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Milwaukee, WI
Mitchell, SD
Mitchell, SD
Norfolk, VA
Norfolk, VA
Northampton, MA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Spencer, IA
Spencer, IA
Springﬁeld, MA
Springﬁeld, MA
Springﬁeld, IL
Springﬁeld, IL

Station
WDBR
WQQL
WNAX
AM:
WISE
WYSE
KGMI
KPUG
KBAI
WKVT
WBCO
WSPO
WINA
WVAX
WRND
WKFN
KRNT
KPSZ
WHMQ
WSVA
WHBG
WHCU
WNYY
WKBK
WZBK
WFEA
WJYI
WJOI
WHMP
WGAN
WZAN
WBAE
WGIN
KICD
WLZX
WTAX
WNAX

Market(1)

Springﬁeld, IL
Springﬁeld, IL
Yankton, SD

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

Power
(Watts)(2)
50,000
25,000
100,000

Expiration Date of
FCC Authorization

December 1, 2020
December 1, 2020
April 1, 2021

December 1, 2019
5,000
5,000(5) December 1, 2019
February 1, 2022
5,000
February 1, 2022
10,000
1,000(5)
February 1, 2022
April 1, 2022
1,000

500(5) October 1, 2020

5,000
December 1, 2019
5,000
October 1, 2019
October 1, 2019
1,000
1,000(5) August 1, 2020
1,000(5) August 1, 2020
February 1, 2021
5,000
February 1, 2021
10,000
April 1, 2022
1,000
5,000
October 1, 2019
1,000(5) October 1, 2019
June 1, 2022
5,000
June 1, 2022
5,000
5,000
April 1, 2022
1,000(5) April 1, 2022
April 1, 2022
5,000
December 1, 2020
1,000
October 1, 2019
1,000
April 1, 2022
1,000
April 1, 2022
5,000
April 1, 2022
5,000
April 1, 2022
1,000
April 1, 2022
1,000
February 1, 2021
1,000
2,500(5) April 1, 2022
1,000
5,000

December 1, 2020
April 1, 2021

(As previously described herein the following television stations were sold on September 1, 2017)

TV/Channel:
KOAM (DTV Ch 7)
KFJX(3) (DTV Ch 13)
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)

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

DTV14,800
DTV 5,600
DTV 900,000
DTV11,350
DTV15,000
DTV15,000
DTV15,000
DTV15,000
DTV 4,000

June 1, 2022
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. WHBG, 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 provided services to KFJX pursuant to a shared services agreement with the licensee of KFJX,

Surtsey Media, LLC (‘‘Surtsey’’). Until the television sale in 2017 we programmed KVCT pursuant to a
time brokerage agreement with 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 operated 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.

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.

On September 29, 2016, the FCC adopted rules to extend to broadcast licensees the same rules and

procedures that common carrier wireless licensees use to seek approval for foreign ownership, with
broadcast-speciﬁc modiﬁcations.

The new rules and procedures allow a broadcast licensee to request in a petition for declaratory ruling

under Title 47 U.S.C. Section 310(b)(4):

(1) approval of up to and including 100 percent aggregate foreign ownership of its controlling

U.S. parent;

(2) approval for a proposed, controlling foreign investor to increase its equity and/or voting interests in

the U.S. parent up to and including 100 percent at some future time without ﬁling a new
petition — this applies where the foreign investor would acquire an initial controlling interest of less
than 100 percent; and

(3) approval for a non-controlling foreign investor named in the petition to increase its equity and/or
voting interests in the U.S. parent at some future time, up to and including a non-controlling
49.99 percent equity and/or voting interest.

The new rules would require the Company to seek speciﬁc approval only of foreign individuals or
entities with a greater than 5 percent ownership interest (or, in certain situations, an interest greater than
10 percent).

The new rules allow broadcast licensees that have foreign ownership rulings to apply those rulings to all
radio and television broadcast licenses then held or subsequently proposed to be acquired by the same licensee
and its covered subsidiaries and affiliates, regardless of the broadcast service (e.g., AM, FM, or TV) or the
geographic area in which the stations are located.

The new methodology provides a framework for a publicly traded licensee or controlling U.S. parent to

ascertain its foreign ownership using information that is ‘‘known or reasonably should be known’’ to the
company in the ordinary course of business.

For publicly traded licensees and U.S. parent companies (like the Company), the new rules formalize the

current equitable practice of recognizing a licensee’s good faith efforts to comply with Section 310(b) where
the non-compliance was due solely to circumstances beyond the licensee’s control that were not known or
reasonably foreseeable to the licensee.

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 FCC 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 FCC 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
affected. 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 owned
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 with UHF television stations are attributed with 50 percent
of the television households in their DMA market for purposes of making this calculation) of 39%.

In September 2016, the FCC voted to eliminate this so-called ‘‘UHF discount,’’ but the decision is subject to
petitions for reconsideration. 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

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

In markets with nine or more TV stations, the FCC has 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 FCC 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. On April 15, 2014, the FCC released its 2014 Quadrennial
Regulatory Review which consists of a Further Notice of Proposed Rulemaking (‘‘FNPRM’’) and Report and
Order (‘‘R&O’’) incorporating the record of its 2010 Quadrennial Regulatory Review into the FNPRM. (In the
2010 Quadrennial Regulatory Review, 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.) The FNPRM sought comment on whether to eliminate restrictions on newspaper/radio combinations
and the radio/television cross-ownership rule in favor of reliance on the local radio rule and the local
television rule. The FCC proposed to retain the current local television ownership rule with a minor
modiﬁcation to update the previous analog contour provision in light of the digital transition. The FCC sought
comment on whether to retain the prohibition on the cross-ownership of newspapers and television stations,
and if so, whether the FCC should reform the restriction to consider waivers for newspaper/television
combinations. The FCC proposed to retain the current local radio ownership rule and the dual network rule
without modiﬁcation. In addition, in the R&O, the FCC attributed to the brokering station same-market
television joint sales agreements (‘‘JSAs’’) that cover more than 15 percent of the weekly advertising time for
the brokered station, but this rule was vacated by the U.S. Court of Appeals for the Third Circuit in
Prometheus Radio Project v. FCC et al., 824 F 3d 33 (2016).

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).

In its 2014 Quadrennial Review, FCC 17-156, released November 20, 2017, the FCC adopted a new
policy effective February 7, 2018, on radio ‘‘embedded markets,’’ i.e., smaller markets, as deﬁned by Nielsen
Audio, that are included in a larger parent market. Pending the outcome of a review of the policy, the FCC
adopted a presumption that a waiver of the local radio ownership rule as to stations in these markets serves
the public interest if the transaction at issue satisﬁes the two-prong test: (1) a station owner would be required
to comply with the numerical ownership limits using the Nielsen Audio Metro methodology in each embedded
market; and (2) the station owner would be required to comply with the ownership limits using a contour-
overlap methodology in lieu of the Commission’s current parent market analysis.

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 have required
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.

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 could voluntarily participate in a ‘‘reverse 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 ﬁled an application with the FCC seeking to participate in the reverse auction; however, the
Company was not a winning bidder in the reverse auction. Therefore, it did not be relinquish any of its
spectrum. However, one of the Company’s former television stations will be required to change its operating
channel. Some or all of the Company’s costs for that change will be reimbursed by the FCC.

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, FCC-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 JSAs). On January 29, 2016,
the FCC released a Report and Order which expanded 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. The Company’s radio stations are in compliance with these rules.

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 ﬁnancing, 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 FCC 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 FCC 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. However, as a result of action by the U.S. Congress in 2015, stations that
have a television JSA signed before the release of the Report and Order will have until October 1, 2025,
to ensure that the agreement complies with the FCC’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 FCC’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. The Report and Order requires that all
attributable television JSAs be ﬁled with the FCC, and we have complied with this deadline.

Prior to the sale of our television stations, we had a television TBA in the Victoria, Texas, market with
Surtsey. On January 31, 2012, we amended the TBA 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 believed that
the TBA was ‘‘grandfathered’’ under the FCC’s rules and did not need to be terminated earlier than the date to
be established in the ownership review proceeding. See ‘‘Ownership Matters’’ above. This TBA was
terminated when we sold our television stations on September 1, 2017.

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 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. When we sold our television stations on September 1, 2017, the debt we
had guaranteed was paid off and the related agreements that we had entered into with Surtsey were
terminated.

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 provided DTV service and terminated NTSC
operations. We held licenses that authorized 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.

Formerly brokered Station KVCT provided DTV service on Channel 11. KFJX-TV, with which

KOAM-TV shared certain services, provided 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 were required to ﬁle with the FCC a report by December 1 of each year describing such
services. None of the Company’s stations offered 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, 2015, 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. Until
September 1, 2017, we owned ﬁve LPTV stations, KUNU-LD, KVTX-LP, KXTS-LD, KMOL-LD, and
KQZY-LD, Victoria, Texas, all of which operate in the digital mode. None of the stations qualiﬁes under the
FCC’s established criteria for Class A status.

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 FCC to modify the rules authorizing the operation of LPFM, as
proposed in MM Docket No. 99-25. In an order released December 4, 2012, the FCC modiﬁed its rules to
implement the new 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.’’ 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 FCC-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. The STELA
Reauthorization Act of 2014 (‘‘STELAR’’) added satellite television carriage to the FCC’s market modiﬁcation
authority, which previously applied only to cable television carriage. STELAR also extended until
December 31, 2019, the exemption from retransmission consent requirements. STELAR permits the FCC to
add communities to, or delete communities from, a station’s local television market for purposes of satellite
carriage, following a written request. In the FCC’s 2015 STELAR Market Modiﬁcation Report and Order
implementing Section 102 of the STELAR, the FCC adopted satellite television market modiﬁcation rules that
provide a process for broadcasters, satellite carriers, and county governments to request changes to the
boundaries of a particular commercial broadcast television station’s local television market to include a new
community located in a neighboring local market. The rules enable a broadcast television station to be carried
by a satellite carrier in such a new community if the station is shown to have a local relationship to that
community.

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 57 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 Report and Order released October 23, 2015, Revitalization of the AM
Service, the FCC announced an opportunity, restricted to AM licensees and permittees, to apply for and
receive authorizations to relocate existing FM translator stations within 250 miles for the sole and limited
purpose of enhancing their existing service to the public. On January 29, 2016, the FCC opened a one-time
only ﬁling window during which only Class C and Class D AM broadcast stations could participate. That
window closed on July 28, 2016, and a second window (open to all classes of stations) opened on July 29,
2016, and closed on October 31, 2016. The FM translators so acquired must rebroadcast the related AM
station for at least four years, not counting any periods of silence. Some of the Company’s subsidiaries that
are AM licensees, acquired FM translators and relocated them to their local markets to pair with its some of
their AM broadcast stations. The FCC opened two windows for the ﬁling of applications for construction
permits for new FM translators. The ﬁrst window (limited to Class D and D AM broadcast stations), was open
from July 21 to August 2, 2017, and the second window (open to all classes of AM broadcast stations), was
open from January 25 to 31, 2018, and have now closed. In the ﬁling windows, qualifying AM licensees
could 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 on a permanent basis.
The Company has ﬁled applications in both windows and has obtained some construction permits as a result.
If the Company’s subsidiaries should decide to sell or suspend operations of an AM station with such an FM
construction permit or license, the Company would also be required to sell or suspend operations of the FM
translator. Where an application for a ‘‘new’’ construction permit is clear of spectrum so it can be granted, the
FCC sets a deadline by which a ‘‘long-form’’ application must be ﬁled to acquire the permit. Where an
application is mutually exclusive (‘‘MX’’) with another proposal, the FCC general affords the applicants an
opportunity to resolve the MX situation and obtain a construction permit. Where the parties cannot resolve the
MX situation, the FCC makes the application subject to an auction where the highest bidder obtains the
permit.

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
FCC’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 FCC 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.’’ In its Report and Order; Order on
Reconsideration of the First Report and Order; Third Order on Reconsideration of the Second Report and
Order; Third Report and Order, released July 21, 2015, the FCC declined to adopt at that time speciﬁc bidding
preferences for other types of entities, including those that serve unserved/underserved areas or areas with
persistent poverty, as well as those that have overcome disadvantages. The FCC further declined to consider
any modiﬁcation of the tribal lands bidding credit because the record did not support revisions to its current
policies for the award of this beneﬁt.

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 were integrated in a series of stages.
Each stage consisted of a reverse auction and a forward auction bidding process, and additional stages as were
necessary. Broadcasters indicated 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 was set. Then the reverse auction bidding process was run to determine the total amount of
incentive payments to broadcasters required to clear that amount of spectrum. The forward auction bidding
process followed the reverse auction bidding process. Full power and Class A station licensees were eligible to
participate in the reverse auction. They could bid to voluntarily relinquish the spectrum usage rights associated
with station facilities that are eligible for protection in the repacking process. Bidders had 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 could limit their bids to a high (channels 7 to 13) or
low (channels 2 to 6) VHF channel. Bidders had the additional option to bid for reassignment from a high
VHF channel to a low VHF channel. Potential bidders had 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 were 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 shares 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 timely ﬁled an application to participate in the reverse auction; however, the Company was not a
winning bidder in the reverse auction. Therefore, it did not relinquish any of its spectrum. However, one of

the Company’s former television stations will be required to change its operating channel. Some or all of the
Company’s costs for that change will be reimbursed by the FCC.

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. A new organization, Global Music Rights, has recently
began issuing licenses for the composers, authors and publishers that it represents. 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. Periodically, bills have been introduced in Congress, that if passed, 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 certain organizations 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. Periodically, bills have been introduced in Congress that, if
adopted, would require the Company to pay additional fees to one or more organizations that would distribute
the money to performers or other entities.

On January 3, 2013, the FCC released the Sixth Further Notice of Proposed Rulemaking, which sought
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 had been raised about the security of the FCC’s Registration System where this
data would be stored. On January 20, 2016, the FCC released its Report and Order, Second Report and Order
and Order on Reconsideration that implemented a Restricted Use FRN (RUFRN) that individuals may use
solely for the purpose of broadcast ownership report ﬁlings. The FCC stated its belief that the RUFRN would
allow for sufficient unique identiﬁcation of individuals listed on broadcast ownership reports without
necessitating the disclosure to the FCC of individuals’ full Social Security Numbers (SSNs). The FCC
eliminated the availability of the Special Use FRN (SUFRN) for broadcast station ownership reports, except in
very limited circumstances. On January 4, 2017, the FCC’s Media Bureau issued an Order or Reconsideration
denying petitions for reconsideration of the requirement. On February 2, 2017, the FCC set aside the Order on
Reconsideration and returned the petitions for reconsideration to pending status to be considered by the full
FCC. 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.

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.

Executive Officers

Our current executive officers are:

Name

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

Catherine A. Bobinski

Age

73
63
60
69

Position

President, Chief Executive Officer and Chairman; Director
Chief Operating Officer
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. Lada has been Chief Operating Officer since March 2016. He was Executive Vice President,
Operations from 2012 to 2016. 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. 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, 2017 our long-term debt was approximately $25,000,000. 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 credit facility is 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 August 18, 2020. 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 affect 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, 2021, and certain other key personnel, including

on-air personalities, we cannot be sure that such key personnel will remain with us. 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 46%, 48% and 46% of our net operating
revenue for the years ended December 31, 2017, 2016 and 2015, 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

Radio broadcasting is a highly competitive business. Our stations compete for listeners/viewers and
advertising revenues within their respective markets directly with other radio stations, as well as with other
media, such as broadcast 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 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
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 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, 2017, our FCC broadcasting licenses represented 37.5% 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
forfeitures 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, publishers, and performers indirectly through third parties. Any proposed legislation that is
adopted into law could add an additional layer of royalties to be paid directly to the record labels and artists.
While this proposed legislation did not become law, it has been the subject of considerable debate and activity
by the broadcast industry and other parties affected by the legislation. It is currently unknown what impact
any potential required royalty payments would have on our results of operations, cash ﬂows or ﬁnancial
position.

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

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

enforcement efforts relating to the regulation of indecency violations, and Congress has increased the penalties
for broadcasting obscene, indecent or profane programming, and these penalties may potentially subject
broadcasters to license revocation, renewal or qualiﬁcation proceedings in the event that they broadcast such
material. In addition, the FCC’s heightened focus on the indecency regulations against the broadcast industry
may encourage third parties to oppose our license renewal applications or applications for consent to acquire
broadcast stations. Because the FCC may investigate indecency complaints prior to notifying a licensee of the
existence of a complaint, a licensee may not have knowledge of a complaint unless and until the complaint
results in the issuance of a formal FCC letter of inquiry or notice of apparent liability for forfeiture. We 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 served. 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
affected our television operations.

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

As of March 2, 2018, Edward K. Christian, our President, Chief Executive Officer and Chairman, holds

approximately 64% of the combined voting power of our Common Stock (not including options to acquire
Class B Common Stock and based on Class B shares generally entitled to ten votes per share). As a result,
Mr. Christian generally is able to control the vote on most matters submitted to the vote of stockholders and,
therefore, is able to direct our management and policies, except with respect to (i) the election of the two
Class A directors, (ii) those matters where the shares of our Class B Common Stock are only entitled to one
vote per share, and (iii) other matters requiring a class vote under the provisions of our certiﬁcate of
incorporation, bylaws or applicable law. For a description of the voting rights of our Common Stock, see
Note 10 of the Notes to Consolidated Financial Statements included with this Form 10-K. Without the
approval of Mr. Christian, we will be unable to consummate transactions involving an actual or potential
change of control, including transactions in which stockholders might otherwise receive a premium for their
shares over then-current market prices.

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

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

Information technology and cybersecurity 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, 2017, the studios and offices of 24 of our 27 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 less than 1 month to 7 years. We own or lease our
transmitter and antenna sites, with lease terms that expire in 3 months to 72 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.

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

The Company’s Class A Common Stock trades on the NYSE American 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 American for the
calendar quarters indicated (prices for periods prior to the four-for-three stock split are adjusted for such split):

Year
2016:

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

2017:

High

Low

$42.55
$46.10
$45.36
$51.25

$51.40
$51.95
$46.80
$46.60

$35.77
$36.70
$37.02
$40.05

$47.55
$45.45
$37.75
$40.35

The closing price for the Company’s Class A Common Stock on March 2, 2018 as reported by the
NYSE American was $38.90. As of March 2, 2018, there were approximately 170 holders of record of the
Company’s Class A Common Stock, and one holder of the Company’s Class B Common Stock.

Dividends

During 2017, the Company’s Board of Directors declared four quarterly cash dividends and a special
cash dividend totaling $2.00 per share on its Classes A and B shares. These dividends totaling approximately
$11.8 million were paid during 2017. See Note 1 of the ﬁnancial statements for speciﬁc details on the
dividends.

During 2016, the Company’s Board of Directors declared four quarterly cash dividends and a special
cash dividend totaling $1.30 per share on its Classes A and B shares. These dividends totaling approximately
$7.6 million were paid during 2016. See Note 1 of the ﬁnancial statements for speciﬁc details on the
dividends.

During 2015, the Company’s Board of Directors declared four quarterly cash dividends and a special
cash dividend totaling $1.10 per share on its Classes A and B shares. These dividends totaling approximately
$6.4 million were paid during 2015. See Note 1 of the ﬁnancial statements for speciﬁc details on the
dividends.

Securities Authorized for Issuance Under Equity Compensation Plan Information

The following table sets forth as of December 31, 2017, 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:

(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

Plan Category
Equity Compensation Plans Approved by

Stockholders:
Employees’ 401(k) Savings and

Investment Plan . . . . . . . . . . . . . .
2005 Incentive Compensation Plan . .

—
96,639(1)

$ —
$0.00(2)

520,665
368,749

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

Total

—
96,639

—
889,414

(1) All 96,639 shares are restricted stock.
(2) Weighted-Average Exercise Price of Outstanding Options is $0.00 as they are all restricted stock.

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, 2017. 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, 2017 . . . . . .
November 1 − November 30, 2017 . . .
December 1 − December 31, 2017 . . .
. . . . . . . . . . . . . . . . . . . . . . .
Total

Total Number
of Shares
Purchased
—
20,134
—
20,134

Average Price
Paid per Share
$ —
$45.134
$ —
$45.134

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Program
—
—
—
—

Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the
Program(a)
$23,315,667
$22,406,934
$22,406,934
$22,406,934

(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, 2013, 2014, 2015, 2016 and 2017 of our Class A Common Stock against the cumulative total
return of the NYSE American 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., The E.W. Scripps Company, The Nielsen Company, Radio
One Inc., Saga Communications, Inc., Salem Communications Corp., Sirius XM Radio Inc., Spanish
Broadcasting System, Inc., and Townsquare Media, Inc. The graph and table assume that $100 was invested
on December 31, 2012, in each of our Class A Common Stock, the NYSE American 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.

Comparision of Five-Year Cumulative Total Return

S
R
A
L
L
O
D

200

150

100

162.75

139.00

111.45

Saga Communications Inc.

NYSE American Stock Market (US
Companies)

Peer Group

2012

2013

2014

2015

2016

2017

Legend

Symbol

Total Return For:

12/12
12/17
(cid:4) Saga Communications Inc.
100.00 149.24 134.85 122.61 165.28 139.00
(cid:5) NYSE American Stock Market (US Companies) 100.00 110.23 115.85 90.09 101.31 111.43
▲ Peer Group
100.00 154.00 143.64 140.76 160.74 162.75

12/16

12/15

12/13

12/14

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, net . . . . .
Impairment of Intangible Assets . . . . . . . . . .
Operating Income From Continuing

2017(1)(2)

Years Ended December 31,
2016(1)(3)
2014(1)(5)(6)
2015(1)(4)
(In thousands except per share amounts)

2013(1)(7)(8)

$118,149
87,759
11,657
55
1,449

$118,955
86,799
10,980
(1,351)
—

$111,792
83,188
10,091
509
874

$113,627
85,167
8,901
(1,210)
1,936

$109,818
79,933
8,172
—
2,033

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

$ 17,229
903
$

$ 22,527
744
$

$ 17,130
855
$

$ 18,833
$ 1,032

$ 19,680
1,271
$

Net Income:

From Continuing Operations
. . . . . . . . . .
From Discontinued Operations . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . .

$ 22,246
32,471
$ 54,717

$ 12,910
5,276
$ 18,186

$ 9,146
4,268
$ 13,414

$ 10,676
4,228
$ 14,904

$ 11,090
4,183
$ 15,273

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

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

Weighted Average Common and Common

3.77
5.50
9.27
5,803

3.77
5.50
9.27

2.20
0.90
3.10
5,761

2.19
0.90
3.09

1.58
0.73
2.31
5,706

1.56
0.73
2.29

1.84
0.73
2.57
5,700

1.83
0.72
2.55

1.93
0.73
2.66
5,681

1.92
0.72
2.64

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

5,807

5,771

5,740

5,753

5,745

Cash Dividends Declared Per Common

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

2.00

1.30

1.10

1.80

2017(1)

2016(1)

December 31,
2015(1)
(In thousands)

2014(1)

2013(1)(8)

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

$ 55,269
$ 56,235
$116,360
$248,769
$ 25,000
$179,465

$ 36,727
$ 49,174
$118,052
$219,998
$ 35,287
$134,982

$ 32,450
$ 50,277
$106,399
$203,464
$ 35,287
$122,816

$ 29,476
$ 47,514
$100,942
$190,965
$ 35,000
$115,245

$ 27,054
$ 48,190
$102,953
$192,199
$ 45,000
$109,701

(1)

In May 2017, the Company entered into an agreement to sell its Joplin, Missouri and Victoria, Texas
television stations and subsequently closed on this transaction in September 2017. The historical results
of operations for the television stations are presented in the discontinued operations for all periods
presented.

(2) Reﬂects the results of WCVL-FM operated under the terms of an LMA from February 1, 2015 until

acquired on April 18, 2017. Reﬂects the results of WCKN-FM, WMXF-FM, WXST-FM, WAVF-FM,
WSPO-AM, W261-DG, W257BQ, WVSC-FM, WLHH-FM, WOEX-FM, W256CB, W293BZ acquired on
September 1, 2017.

(3) Reﬂects the results of WLVQ-FM operated under the terms of an LMA from November 16, 2015 until

acquired in February 2016.

(4) Reﬂects the results of WSVA-AM, WHBG-AM, WQPO-FM, WWRE-FM, and WMQR-FM acquired in

(5)

August 2015 and WSIG-FM acquired in September 2015. Reﬂects the results of WLVQ-FM operated
under the terms of an LMA effective November 2015. In December 2015, the Company disposed of the
Illinois Radio Network.
In December 2014, the Company sold the Michigan Radio Network, the Michigan Farm Network, the
Minnesota News Network, the Minnesota Farm Network.
(6) Reﬂects the results of WFIZ-FM, acquired in January 2014.
(7)

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.

(8)

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, write-off debt issuance costs,
other (income) expense, and income tax provision are managed on a consolidated basis and are reﬂected only
in our discussion of consolidated results.

On May 9, 2017 the Company entered into an agreement to sell its Joplin, Missouri and Victoria, Texas
television stations and subsequently closed on this transaction on September 1, 2017. The historical results of
operations for the television stations are presented in the discontinued operations for all periods presented (see
Note 3). As a result of the Company’s television stations being reported as discontinued operations the
Company only has one reportable segment at December 31, 2017. Unless indicated otherwise, the information
in the Notes to Consolidated Financial Statements relates to the Company’s continuing operations. The
discussion of our operating performance focuses on operating income because we manage our stations
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.

Continuing Operations — Radio Stations

Our radio station’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, 2017, 2016 and 2015, approximately 88%, 86% and 88%, respectively, of our
radio station’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. Political
revenue signiﬁcantly increased in 2016 due to the increased number of national, state, and local elections in
most of our markets as compared to 2015 and 2017.

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 multiple
platforms. Our goal is to allow our listeners to connect with our brands on demand wherever, however, and
whenever they choose. We continue to create opportunities through targeted digital advertising and an array of
digital services that include online promotions, mobile messaging, and email marketing. In 2017, we also
made a concentrated effort to ensure our stations were available via smart speakers such as Amazon Echo,
Google Home, etc.

During the years ended December 31, 2017, 2016 and 2015, our Columbus, Ohio; Des Moines, Iowa;

Manchester, New Hampshire; Milwaukee, Wisconsin and Norfolk, Virginia markets, when combined,
represented approximately 41%, 42%, and 41%, 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,
2016

2015

2017

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

11%
7%
5%
12%
6%

12%
8%
5%
12%
5%

9%
8%
6%
12%
6%

During the years ended December 31, 2017, 2016 and 2015, the radio stations in our ﬁve largest markets

when combined, represented approximately 48%, 49% and 44%, 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,
2016

2015

2017

15%
7%
6%
14%
6%

15%
7%
9%
14%
4%

10%
8%
8%
13%
5%

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

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

Discontinued Operations — Television Stations

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

stations. The number of advertisements available for broadcast on our television stations were limited by
network affiliation and syndicated programming agreements and, with respect to children’s programs, federal
regulation. Our television stations’ local market managers determined the number of advertisements to be
broadcast in locally produced programs only, which were 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 was based upon population, available television advertising
revenue in that particular market, and the popularity of programming being broadcast.

Our ﬁnancial results were dependent on a number of factors, the most signiﬁcant of which was our

ability to generate advertising revenue through rates charged to advertisers. The rates a station was able to
charge were, 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 strived to maximize revenue by constantly adjusting prices for our commercial spots based

upon local market conditions, advertising demands and ratings. While there may have been 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, was generally the result
of pricing adjustments, which were 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 provided us with the viewer loyalty we were trying to achieve.

Most of our revenue was generated from local advertising, which was sold primarily by each television
markets’ sales staff. For the 8 months ended August 31, 2017 and for the years ended December 31, 2016, and
2015, approximately 83%, 77%, and 85% respectively, of our television segment’s gross revenue was from
local advertising. To generate national advertising sales, we engaged independent advertising sales
representatives that specialize in national sales for each of our television markets.

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

Results of Operations

The following tables summarize our results of operations for the three years ended December 31, 2017,

2016 and 2015.

Consolidated Results of Operations

2017 vs. 2016(1)

2016 vs. 2015

Years Ended December 31,
2016

2017

$ Increase
(Decrease)
(In thousands, except %’s and per share information)

% Increase
(Decrease)

2015

$ Increase
(Decrease)

% Increase
(Decrease)

Net operating revenue . . . . . . . . . . . . . $118,149 $118,955 $111,792
83,188
Station operating expense . . . . . . . . . . .
10,091
Corporate G&A . . . . . . . . . . . . . . . . .
509
. . .
Other operating expense (income), net
Impairment of intangible assets
874
. . . . . . .
Operating income from continuing

86,799
10,980
(1,351)
—

87,759
11,657
55
1,449

(806)
960
677
1,406
1,449

(0.7)% $ 7,163
3,611
1.1%
889
6.2%
(1,860)
(874)

N/M
N/M

6.4%
4.3%
8.8%

N/M
N/M

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

taxes . . . . . . . . . . . . . . . . . . . . . .
Income tax (beneﬁt) expense . . . . . . . . .
Income from continuing operations, net of

tax . . . . . . . . . . . . . . . . . . . . . . .

Income from discontinued operations, net

17,229
903
—

16,326
(5,920)

22,527
744
—

21,783
8,873

17,130
855
557

(5,298)
159
—

(23.5)%
21.4%
—

5,397
(111)
(557)

31.5%
(13.0)%
N/M

15,718
6,572

(5,457)
(14,793)

(25.1)%
N/M

6,065
2,301

38.6%
35.0%

22,246

12,910

9,146

9,336

N/M

3,764

41.2%

of tax . . . . . . . . . . . . . . . . . . . . . .

4,268
Net income . . . . . . . . . . . . . . . . . . . . $ 54,717 $ 18,186 $ 13,414

32,471

5,276

27,195
$ 36,531

N/M
N/M

1,008
$ 4,772

23.6%
35.6%

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

. . . . . . . .

3.77 $
5.50
9.27 $

2.19 $
0.90
3.09 $

1.56
0.73
2.29

1.58
4.60
6.18

72.2% $ 0.63
0.17
N/M
$ 0.80
N/M

40.4%
23.3%
34.9%

Results of Discontinued Operations

2017 vs. 2016

2016 vs. 2015

Net operating revenue . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . .
Other operating expense (income) . . . . . .
Operating income from discontinued

operations . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . .
Income before income taxes from

discontinued operations . . . . . . . . . . .
Pretax gain on the disposal of discontinued
operations . . . . . . . . . . . . . . . . . . .

Total pretax gain on discontinued

$14,238
9,757
31

4,450
21
—

Years Ended December 31,
2016

2017(1)

2015

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s and per share information)
$ (9,398)
(4,986)
73

$21,064
14,080
32

(39.8)% $2,572
663
(33.8)%
(74)
N/M

$ Increase
(Decrease)

$23,636
14,743
(42)

8,935
32
—

6,952
33
(417)

(4,485)
(11)
—

(50.2)% 1,983
(1)
(34.4)%
417
—

% Increase
(Decrease)

12.2%
4.7%

N/M

28.5%
(3.0)%
N/M

4,429

8,903

7,336

(4,474)

(50.3)% 1,567

21.4%

50,842

—

— 50,842

N/M

—

operations . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Income tax expense
Income from discontinued operations . . . .

55,271
22,800
$32,471

8,903
3,627
$ 5,276

7,336
3,068
$ 4,268

46,368
19,173
$27,195

N/M
N/M
N/M

1,567
559
$1,008

21.4%
18.2%
23.6%

(1) Results of operations for the Television stations are reﬂected through August 31, 2017. The effective date

of the sale was September 1, 2017.

N/M = Not Meaningful

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

For the year ended December 31, 2017, consolidated net operating revenue was $118,149,000 compared

with $118,955,000 for the year ended December 31, 2016, a decrease of $806,000 or 0.7%. We had an
increase of approximately $2,885,000 that was attributable to stations that we did not own or operate for the
entire comparable period, offset by a decrease of $3,691,000 generated by stations we owned or operated for
the comparable period in 2016 (‘‘same station’’). The decrease in same station revenue was primarily the
result of decreases in gross political revenue of $2,260,000, and gross local revenue of $1,587,000 from 2016.
The decrease in gross political revenue was due to a lower number of national, state and local elections in
most of our markets. The decrease in gross local revenue was due to decreases in our Bellingham,
Washington; Columbus, Ohio and Springﬁeld, Illinois markets.

Station operating expense was $87,759,000 for the year ended December 31, 2017, compared with
$86,799,000 for the year ended December 31, 2016, an increase of $960,000 or 1.1%. We had an increase of
approximately $2,442,000 that was attributable to stations that we did not own or operate for the entire
comparable period, offset by a decrease of approximately $1,482,000 generated by stations we owned or
operated for the comparable period in 2016. The decrease is primarily attributable to a decrease of $710,000
in licensing agreements, $387,000 in commission expenses due to lower revenues and $346,000 in
compensation costs.

Operating income for the year ended December 31, 2017 was $17,229,000 compared to $22,527,000 for

the year ended December 31, 2016, a decrease of $5,298,000 or 23.5%. The decrease was a result of the
decrease in net operating revenue and the increase in station operating expense, described above, an increase
in our corporate general and administrative expenses of $677,000 or 6.2%, an impairment charge of
$1,449,000 in 2017 and a decrease in other operating income of $1,406,000 from 2016. The increase in
corporate expenses is due to an increase in key man life insurance of $278,000, an increase of $212,000 in
compensations costs and an increase in non-cash compensation related to the amortization of restricted stock
grants of $179,000. In 2016, we had other operating income of $1,351,000 due to the gain of $1,415,000
received from the sale of a tower in Norfolk, Virginia.

Income from continuing operations, net of tax for the year ended December 31, 2017 was $22,246,000
compared to $12,910,000 for the year ended December 31, 2016, an increase of $9,336,000 or 72.3%. The
increase in income from continuing operations, net of tax is primarily due to the income tax beneﬁt of
approximately $11.5 million for the year due to a decrease in the deferred tax rate for federal income tax from
35% to 21% as a result of the Tax Cuts and Jobs Act partially offset by the decrease of operating income,
described above, and an increase in interest expense of $159,000 due to an increase in our interest rates. See
Note 6 of the ﬁnancial statements for more information on the impact of the Tax Cuts and Jobs Act.

Income from discontinued operations, net of tax for the period ended August 31, 2017 was $32,471,000
compared to $5,276,000 for the year ended December 31, 2016 an increase of $27,195,000. The increase was
a direct result of the pretax gain on the disposal of the operations of $50,842,000, a decrease in station
operating expense of $4,986,000 or 33.8%, partially offset by a decrease in net operating revenue of
$9,398,000 or 39.8% and an increase in income tax expense of $19,173,000 primarily attributable to the gain
on the sale of the television stations. For the period ended August 31, 2017, net operating revenue of our
television stations was $14,238,000 compared with $23,636,000 for the year ended December 31, 2016, a
decrease of $9,398,000 or 39.8% primarily due to only operating the television stations for eight months in
2017 and a decrease in gross political revenue in our Joplin, Missouri market. Station operating expense in the
television stations for the period ended August 31, 2017 was $9,757,000, compared with $14,743,000 for the
year ended December 31, 2016, a decrease of $4,986,000 or 33.8%. The decrease is primarily due to only
operating the television stations for the eight months in 2017 compared to the whole year in 2016.

We generated net income of $54,717,000 ($9.27 per share on a fully diluted basis) during the year ended

December 31, 2017, compared to $18,186,000 ($3.09 per share on a fully diluted basis) for the year ended
December 31, 2016, an increase of $36,531,000. This is a direct result of the increase of $27,195,000 in
income from discontinued operations, net of tax and the increase in income from continuing operations, net of
tax of $9,336,000.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

For the year ended December 31, 2016, consolidated net operating revenue was was $118,955,000

compared with $111,792,000 for the year ended December 31, 2015, an increase of $7,163,000 or 6.4%.
Approximately $5,816,000 or 81% was attributable to stations that we did not own or operate for the entire
comparable period and $1,347,000 was attributable to stations we owned or operated for the comparable
period. The increase in same station revenue was due primarily to an increase in gross political revenue of
$2,334,000 partially offset by a decrease in gross local revenue of $983,000 from 2015. The majority of the
increase in political revenue was attributable to our Des Moines, Iowa; Manchester, New Hampshire and
Milwaukee, Wisconsin markets. The increase in gross political revenue was due to a higher number of
national, state and local elections in most of our markets. The decrease in gross local revenue was mainly
attributable to decreases in our Bellingham, Washington and Milwaukee, Wisconsin markets.

Station operating expense was $86,799,000 for the year ended December 31, 2016, compared with

$83,188,000 for the year ended December 31, 2015, an increase of $3,611,000 or 4.3%. The increase was
entirely attributable to an increase from stations that we did not own or operate for the entire comparable
period.

Operating income for the year ended December 31, 2016 was $22,527,000 compared to $17,130,000 for

the year ended December 31, 2015, an increase of $5,397,000 or 31.5%. The increase was a result of the
increase in net operating revenue partially offset by the increase in station operating expense, described above.
Additionally, there was an increase in corporate general and administrative expenses of $889,000 or 8.8% and
an increase in other operating income of $1,860,000. Operating income for 2015 also included a non-cash
impairment charge of $874,000 in connection with our review of broadcast licenses during the fourth quarter
(see Note 2 in the accompanying notes to the consolidated ﬁnancial statements). The increase in corporate
expenses is due to an increase in compensation costs of $527,000 and an increase in non-cash compensation
related to the amortization of restricted stock grants of $446,000 partially offset by a decrease in consulting
fees of $167,000. Other operating income during 2016 related to the gain of $1,415,000 received from the sale
of a tower in our Norfolk, Virginia market as discussed in Note 16 of the ﬁnancial statements. Other operating
expenses during 2015 included the loss of $400,000 incurred from the donation of WBOP-FM to Liberty
University, Inc.

Income from continuing operations, net of tax for the year ended December 31, 2016 was $12,910,000

compared to $9,146,000 for the year ended December 31, 2015, an increase of $3,764,000 or 41.2%. The
increase in income from continuing operations, net of tax is due to the increase in operating income of
$5,397,000, as described above, and a decrease in the write-off of debt issuance costs of $557,000, and a
decrease in interest expense of $111,000 driven by a decrease in interest rates and amortization of bank fees
during 2016. These were partially offset by an increase in income tax expense of $2,301,000

Income from discontinued operations, net of tax for year ended December 31, 2016 was $5,276,000
compared to $4,268,000 for the year ended December 31, 2015 an increase of $1,008,000. The increase was a
result of the increase in net operating revenue of $2,572,000, partially offset by an increase in station
operating expenses of $663,000, combined with an increase in other operating income of $74,000 related to
the gain on disposal of ﬁxed assets in 2016 compared to the loss on the disposal of ﬁxed assets in 2015 and a
decrease in other income of $417,000 primarily attributable to a gain recognized from insurance proceeds
related to lightning damage to two of our transmitters in 2015. The increase in revenue was due primarily to
an increase in gross political revenue of $2,929,000 partially offset by a decrease in gross local revenue of
$713,000 from 2015. The increase in political revenue was due to a higher number of national, state and local
elections our Joplin, Missouri market. The decrease in gross local revenue was mainly attributable to our
Victoria, Texas market. The increase in station operating expense was due to increases in compensation related
expenses, healthcare costs, national commission expenses, retransmission expense and program rentals of
$188,000, $181,000, $159,000, $102,000 and $93,000, respectively. The retransmission cost increases are a
direct result of increased revenue in 2016.

We generated net income of $18,186,000 ($3.09 per share on a fully diluted basis) during the year ended

December 31, 2016, compared to $13,414,000 ($2.29 per share on a fully diluted basis) for the year ended
December 31, 2015, an increase of $4,772,000. This is a direct result of the increase of $3,764,000 of income
from continuing operations, net of tax and the increase of $1,008,000 of income from discontinued operations,
net of tax.

Liquidity and Capital Resources

Debt Arrangements and Debt Service Requirements

On August 18, 2015, we entered into a new credit facility (the ‘‘Credit Facility’’) with a group of banks.

In connection with the execution of the Credit Facility, the credit agreement in place at June 30, 2015 (the
‘‘Old Credit Agreement’’) was terminated, and all outstanding amounts were paid in full. The Credit Facility
consists of a $100 million ﬁve-year revolving facility (the ‘‘Revolving Credit Facility’’) and matures on
August 18, 2020.

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 proceeds from the Credit Facility were used to repay all amounts outstanding on our Old Credit
Agreement and pay transactional fees. 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. We wrote-off unamortized debt issuance costs relating to
the Old Credit Agreement of approximately $557 thousand, pre-tax, due to entering into this new credit
facility during the quarter ended September 30, 2015.

Approximately $266 thousand of debt issuance costs related to the Credit Facility were capitalized and

are being amortized over the life of the Credit Facility. These deferred debt costs are included in other assets,
net in the condensed consolidated balance sheets.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR (1.375%
at December 31, 2017), plus 1% to 2% or the base rate plus 0% to 1%. The spread over LIBOR and the base
rate vary from time to time, depending upon our ﬁnancial leverage. Letter of credit issued under the Credit
Facility will be subject to a participation fee (which is equal to the interest rates applicable to Eurocurrency
Loans, as deﬁned in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25%
per annum payable to the issuing bank. We also pay quarterly commitment fees of 0.2% to 0.3% 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

December 31, 2017) 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.

We had approximately $75 million of unused borrowing capacity under the Revolving Credit Facility at

December 31, 2016.

On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000, respectively

of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility.

The loan agreement of approximately $1.1 million of secured debt affiliate was amended in April 2017 to

extend the due date of the loan for three years to mature on May 1, 2020. Our affiliate repaid this loan when
the television stations were sold on September 1, 2017.

Sources and Uses of Cash

During the years ended December 31, 2017, 2016 and 2015, we had net cash ﬂows from operating
activities from continuing operations of $23,912,000, $21,828,000 and $22,042,000, 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, 2017, we have repurchased two million shares of our Class A
Common Stock for $53.3 million. During the year ended December 31, 2017, approximately 21,000 shares
were retained for payment of withholding taxes for $946,000 related to the vesting of restricted stock.

Our capital expenditures, exclusive of acquisitions, for the year ended December 31, 2017 were
$6,246,000 ($3,967,000 in 2016) for continuing operations and $335,000 and $894,000 for the years ended
December 31, 2017 and 2016, respectively, for discontinued operations. We anticipate capital expenditures in
2018 to be approximately $5.0 million to $6.0 million, which we expect to ﬁnance through funds generated
from operations.

On March 3, 2017, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30
per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid
on April 14, 2017 to shareholders of record on March 28, 2017 and funded by cash on the Company’s balance
sheet.

On May 3, 2017, the Company’s Board of Directors declared a regular cash dividend of $0.30 per share

on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, was paid on
June 9, 2017 to shareholders of record on May 22, 2017 and funded by cash on the Company’s balance sheet.

On September 13, 2017, the Company’s Board of Directors declared a regular cash dividend of $0.30 per
share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million was paid on
October 13, 2017 to shareholders of record on September 25, 2017 and funded by cash on the Company’s
balance sheet.

On December 7, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.30 per

share and a special cash dividend of $0.80 per share on its Classes A and B shares. This dividend totaling
approximately $6.5 million was paid on January 5, 2018 to shareholders of record on December 18, 2017.

On February 28, 2018, the Company’s Board of Directors declared a regular cash dividend of $0.30 per
share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million, will be paid
on March 30, 2018 to shareholders of record on March 12, 2018.

On January 16, 2017, we entered into an asset purchase agreement to purchase an FM radio station

(WCVL) from WUVA, Incorporated, serving the Charlottesville, Virginia market for approximately
$1,650,000. Simultaneously, we entered into a TBA to begin operating the station on February 1, 2017. We
completed this acquisition on April 18, 2017. This acquisition was ﬁnanced through funds generated from
operations.

On May 9, 2017 we entered into a deﬁnitive agreement to sell our Joplin, Missouri and Victoria, Texas

television stations for approximately $66.6 million, subject to certain adjustments, to Evening Telegram
Company d/b/a Morgan Murphy Media (the ‘‘Television Sale’’). The Television Sale was completed on
September 1, 2017 and the Company received net proceeds of $69.5 million which included the sales price of
$66.6 million, the sales of accounts receivable of approximately $3.4 million, offset by certain closing
adjustments and transactional costs of $500 thousand. The Company recognized a pretax gain of $50.8 million
as a result of the Television Sale in the third quarter of 2017. The gain net of tax for the Television Sale was
$29.9 million. Effective September 1, 2017, the Company used $24.2 million of the proceeds from the
Television Sale to ﬁnance the acquisition of radio stations in South Carolina (as described in Note 9). On
October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000, respectively of the
proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility (as deﬁned and
described in Note 8).

On May 9, 2017, the Company entered into an Asset Purchase Agreement with Apex Media Corporation

and Pearce Development, LLC f/k/a Apex Real Property, LLC to purchase, for approximately $23 million
(subject to certain purchase price adjustments) plus the right to air certain radio commercials, substantially all
the assets related to the operation of the following radio stations principally serving the South Carolina area:
WCKN (FM), WMXF(FM), WXST(FM), WAVF(FM), WSPO(AM), W261DG, W257BQ, WVSC(FM),
WLHH(FM), WOEZ(FM), W256CB, W293BZ. The Company closed this transaction effective September 1,
2017, simultaneously with the closing of the Television Sale using funds generated from the Television Sale.

We continue to actively seek and explore opportunities for expansion through the acquisitions of

additional broadcast properties.

We anticipate that any future acquisitions of radio and television stations and dividend payments will be
ﬁnanced through funds generated from operations, borrowings under the Credit Agreement, additional debt or
equity ﬁnancing, or a combination thereof. However, there can be no assurances that any such ﬁnancing will
be available on acceptable terms, if at all.

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, 2017:

Payments Due By Period

Contractual Obligations:

Total

Less Than
1 Year

Long-Term Debt Obligations(1)
. . . . . . . . . .
Interest Payments on Long-Term Debt(2)
. . .
. . . . . . . . . . . . . . . . . . .
Operating Leases
Purchase Obligations(3)
. . . . . . . . . . . . . . .
Other Long-Term Liabilities . . . . . . . . . . . .
Total Contractual Cash Obligations . . . . . . .

$25,000
2,333
8,165
26,938
—
$62,436

$ —
886
1,453
13,344
—
$15,683

1 to 3 Years
(In thousands)
$25,000
1,447
2,131
10,365
—
$38,943

4 to 5 Years

More Than
5 Years

$ —
—
1,575
1,594
—
$3,169

$ —
—
3,006
1,635
—
$4,641

(1) Under our Credit Facility, the maturity on outstanding debt of $25 million could be accelerated if we do

(2)

(3)

not maintain certain covenants. (See Note 4 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 $14,758,000 in obligations under employment agreements and contracts with on-air
personalities, other employees, and our President, CEO, and Chairman, Edward K. Christian.

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 2-4% of our outstanding receivables. The
effect of an increase in our allowance of 1% of our outstanding receivables as of December 31, 2017, from
3.9% to 4.9% or from $727,000 to $923,000 would result in a decrease in net income of $117,600, net of
taxes for the year ended December 31, 2017.

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, 2017, we have recorded approximately
$93,259,000 in broadcast licenses and $15,558,000 in goodwill, which represents 43.7% 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 2017, we recognized a $1,449,000 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.

There was no impairment of broadcast licenses in 2016.

During the fourth quarter of 2015, we recognized a $874,000 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.

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, 2017, the Company would have recorded an additional broadcast license

impairment of approximately $1.4 million; had the fair values of each of our broadcasting licenses been lower
by 20% as of December 31, 2017, the Company would have recorded an additional broadcast license
impairment of approximately $6.1 million; and had the fair value of our broadcasting licenses been lower by
30% as of December 31, 2017, the Company would have recorded an additional broadcast license impairment
of approximately $12.9 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 2017 than they did during 2017, our interest
expense would increase, and income before taxes would decrease by $332,000. These amounts are determined
by considering the impact of the hypothetical interest rates on our borrowing cost. This analysis does not
consider the effects of the reduced level of overall economic activity that could exist in such an environment.
Further, in the event of a change of such magnitude, management would likely take actions to further mitigate
its exposure to the change. However, due to the uncertainty of the speciﬁc actions that would be taken and
their possible effects, the sensitivity analysis assumes no changes in our ﬁnancial structure.

Inﬂation

The impact of inﬂation on our operations has not been signiﬁcant to date. There can be no assurance that

a high rate of inﬂation in the future would not have an adverse effect on our operations.

Recent Accounting Pronouncements

Recent accounting pronouncements are described in Note 1 to the accompanying 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, 2017 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, 2017. Our internal control over ﬁnancial reporting as of December 31, 2017 has
been audited by UHY LLP, an independent registered public accounting ﬁrm, as stated in its report which
appears below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors Saga Communications, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Saga Communications, Inc.’s (the Company’s) internal control over ﬁnancial reporting as of
December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the
Company maintained, in all material respects, effective internal control over ﬁnancial reporting as of
December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued
by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of Saga Communications, Inc. as of December 31,
2017 and 2016, and the related consolidated statements of income, stockholders’ equity, and cash ﬂows for
each of the three years in the period ended December 31, 2017 and the related notes and ﬁnancial statement
schedule, and our report dated March 13, 2018 expressed an unqualiﬁed opinion thereon.

Basis for Opinion

The Company’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 Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over ﬁnancial reporting based on our audit. We are a
public accounting ﬁrm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over ﬁnancial reporting
included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Deﬁnition and Limitations of Internal Control over Financial Reporting

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.

/s/ UHY LLP

Farmington Hills, Michigan
March 13, 2018

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 2018 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, 2017 and 2016 . . . . . . . . . . . . . . .

— Consolidated Statements of Income for the years ended December 31, 2017, 2016

and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— Consolidated Statements of Stockholders’ Equity for the years ended December 31,

2017, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016
and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

To the Shareholders and the Board of Directors of Saga Communications, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Saga Communications, Inc. (the
‘‘Company’’) as of December 31, 2017 and 2016, and the related consolidated statements of income,
stockholders’ equity and cash ﬂows for each of the three years in the period ended December 31, 2017, and
the related notes and ﬁnancial statement Schedule II, Valuation and Qualifying Accounts listed in the index at
item 15(a)(2) (collectively referred to as the ‘‘ﬁnancial statements’’). In our opinion, the ﬁnancial statements
present fairly, in all material respects, the consolidated ﬁnancial position of Saga Communications, Inc. at
December 31, 2017 and 2016, and the consolidated results of its operations and its cash ﬂows for each of the
three years in the period ended December 31, 2017, 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) (PCAOB), the Company’s internal control over ﬁnancial reporting as of December 31, 2017,
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, 2018
expressed an unqualiﬁed opinion thereon.

Basis for Opinion

These ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s ﬁnancial statements based on our audits. We are a public accounting
ﬁrm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the ﬁnancial statements, whether due to error or fraud and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the ﬁnancial statements. Our audits also included evaluating the
accounting principles used and signiﬁcant estimates made by management, as well as evaluating the overall
presentation of the ﬁnancial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ UHY LLP

We have served as the Company’s auditor since 2015.

Farmington Hills, Michigan
March 13, 2018

Saga Communications, Inc.

Consolidated Balance Sheets
(In thousands, except par value)

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance of $727 ($518 in 2016) . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets
Net property and equipment

Other assets:

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

amortization of $12,588 ($11,804 in 2016)

. . . . . . . . . . . . . . . . . . . . . .
Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2017

2016

$ 53,030
19,307
2,517
1,320
—
76,174
56,235

93,259
15,558

7,543
—
$248,769

$ 26,697
17,735
2,397
1,318
4,625
52,772
49,174

86,622
7,407

5,975
18,048
$219,998

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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

$ 2,206

1,618

Accrued expenses:

Payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities of discontinued operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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, 6,694

issued (6,638 in 2016)

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

Class B common stock, $.01 par value, 3,500 shares authorized, 898

issued and outstanding (878 in 2016)

. . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock (1,656 shares in 2017 and 1,625 in 2016, at cost) . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,836
6,529
3,243
1,091
—
20,905
21,072
25,000
2,327
—
69,304
—

—

6,954
—
3,198
1,304
2,971
16,045
29,741
35,287
2,885
1,058
85,016
—

—

9
62,675
151,608
(34,894)
179,465
$248,769

8
59,557
108,733
(33,382)
134,982
$219,998

Note: Certain prior period amounts have been reclassiﬁed to conform to the current year presentation.

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Income

Net operating revenue

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

Operating expenses (income):

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

Operating income from continuing operations

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

Other (income) expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Write-off of debt issuance costs
. . . . . .

Income from continuing operations before income taxes

Income tax provision:

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

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

Basic earnings per share:

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

Weighted average common shares

Diluted earnings per share:

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

Weighted average common and common equivalent shares

Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . .

2017

Years Ended December 31,
2016
(In thousands, except per share data)
118,955

2015

111,792

$118,149

87,759
11,657
55
1,449
100,920
17,229

903
—
16,326

2,290
(8,210)
(5,920)
22,246
32,471
$ 54,717

3.77
5.50
9.27
5,803

3.77
5.50
9.27
5,807

2.00

86,799
10,980
(1,351)
—
96,428
22,527

744
—
21,783

6,626
2,247
8,873
12,910
5,276
18,186

2.20
0.90
3.10
5,761

2.19
0.90
3.09
5,771

1.30

83,188
10,091
509
874
94,662
17,130

855
557
15,718

4,091
2,481
6,572
9,146
4,268
13,414

1.58
0.73
2.31
5,706

1.56
0.73
2.29
5,740

1.10

Note: Certain prior period amounts have been reclassiﬁed to conform to the current year presentation.

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2017, 2016 and 2015

Class A
Common Stock

Class B
Common Stock

Shares Amount Shares Amount

Additional
Paid-In
Capital

(In thousands)

Retained
Earnings

Treasury
Stock

Total
Stockholders’
Equity

Balance at January 1, 2015 . . . . . . . . . . 6,446
Net income . . . . . . . . . . . . . . . . . . . .
Conversion of shares from Class B to

$64

843

$ 8

$52,496 $ 91,178 $(28,501) $115,245
13,414

13,414

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

1
40
26
—
(2) —
1
93

(40)
30

(1)
—

3,393

(4,162)

(6,412)

—
—
—
(767)
(6,412)

stock awards

. . . . . . . . . . . . . . . . .
Purchase of shares held in treasury . . . . .
401(k) plan contribution . . . . . . . . . . . .
Balance at December 31, 2015 . . . . . . . . 6,603
Net income . . . . . . . . . . . . . . . . . . . .
Conversion of shares from Class B to

$66

865

$ 8

1,655

1,655
(563)
244
$57,510 $ 98,180 $(32,948) $122,816
18,186

(563)
278

18,186

(34)

Class A . . . . . . . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . . . . .
Dividends declared per common share . . .
Compensation expense related to restricted

12
23

—
—

(12)
25

—
—

(7,633)

—
—
(7,633)

stock awards

. . . . . . . . . . . . . . . . .
Purchase of shares held in treasury . . . . .
401(k) plan contribution . . . . . . . . . . . .
Balance at December 31, 2016 . . . . . . . . 6,638
Net income . . . . . . . . . . . . . . . . . . . .
Conversion of shares from Class B to

$66

878

$ 8

2,101

2,101
(746)
258
$59,557 $108,733 $(33,382) $134,982
54,717

(746)
312

54,717

(54)

—
17
19
—
(1) —
1
21

(17)
29

—
1

—

(1)

826

—
—
—
1
(11,842)

(826)

(11,842)

2,279

2,279
(946)
274
$62,675 $151,608 $(34,894) $179,465

(946)
260

stock awards

. . . . . . . . . . . . . . . . .
Purchase of shares held in treasury . . . . .
401(k) plan contribution . . . . . . . . . . . .
Balance at December 31, 2017 . . . . . . . . 6,694

$67

898

$ 9

See accompanying notes.

Saga Communications, Inc.

Consolidated Statements of Cash Flows

Cash ﬂows from operating activities:

Net income

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

$ 54,717

$ 18,186

$ 13,414

2017

Years Ended December 31,
2016
(In thousands)

2015

Adjustments to reconcile net income to net cash provided by

operating activities:
. . . . . . . . . . . . . . . . .
Income from discontinued operations
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes
Impairment of intangible assets
. . . . . . . . . . . . . . . . . . . . .
Amortization of deferred costs . . . . . . . . . . . . . . . . . . . . . .
Compensation expense related to restricted stock awards . . . .
(Gain) loss on sale of assets
. . . . . . . . . . . . . . . . . . . . . . .
Barter revenue, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred and other compensation . . . . . . . . . . . . . . . . . . . .
Write-off of debt issuance costs . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities:

Decrease (increase) in receivables and prepaid expenses . . .
Increase in accounts payable, accrued expenses, and other

Total adjustments

liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
. .
. . . . . . . . . . .

Net cash provided by continuing operating activities
Net cash provided by (used in) discontinued operating activities
Net cash provided by (used in) operating activities

Cash ﬂows from investing activities:

. . . . . . . . . . . . . . . . . .
Acquisition of property and equipment
Proceeds from sale and disposal of assets . . . . . . . . . . . . . . . .
Acquisition of broadcast properties
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities
Net cash used in continuing investing activities . . . . . . . . . . . . . .
Net cash received provided by (used in) discontinued operations

investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .

Net cash received from (used in) investing activities

Cash ﬂows from ﬁnancing activities:

. . . . . . . . . . . . . . . . . . . . . . . . .
Payments on long-term debt
Proceeds from 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

(32,471)
6,251
(8,210)
1,449
53
2,279
55
(251)
(337)
—

(5,276)
5,876
2,247
—
53
2,101
(1,351)
(254)
14
—

(4,268)
5,425
2,481
874
131
1,655
509
(163)
(41)
557

(434)

(885)

233

811
(30,805)
23,912
(18,538)
5,374

(6,246)
419
(25,856)
(5)
(31,688)

69,193
37,505

(10,287)
—
(5,313)
—
(946)
(16,546)
26,333
26,697
$ 53,030

1,117
3,642
21,828
7,478
29,306

(3,967)
1,676
(12,841)
39
(15,093)

(835)
(15,928)

—
—
(7,633)
—
(746)
(8,379)
4,999
21,698
$ 26,697

1,235
8,628
22,042
6,577
28,619

(3,570)
165
(11,842)
(666)
(15,913)

(1,193)
(17,106)

(35,000)
35,287
(6,412)
(266)
(1,331)
(7,722)
3,791
17,907
$ 21,698

Note: Certain prior period amounts have been reclassiﬁed to conform to the current year presentation.

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, 2017, we owned or operated seventy-ﬁve
FM and thirty-three AM radio stations, serving twenty-six markets throughout the United States. On May 9,
2017 the Company entered into an agreement to sell its Joplin, Missouri and Victoria, Texas television stations
and subsequently closed on this transaction on September 1, 2017. The historical results of operations for the
television stations are presented in the discontinued operations for all periods presented (see Note 3). As a
result of the Company’s television stations being reported as discontinued operations the Company only has
one reportable segment at December 31, 2017. Unless indicated otherwise, the information in the Notes to
Consolidated Financial Statements relates to the Company’s continuing operations.

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

Certain cash deposits with ﬁnancial institutions may at times exceed FDIC insurance limits.

Our top six markets when combined represented 46%, 48% and 46% of our net operating revenue for

the years ended December 31, 2017, 2016 and 2015, 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, 2017 and 2016.

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, 2017.

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,
2017, 2016 and 2015 was as follows:

Year Ended

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

December 31, 2017 . . . . . . . . . . . . . . .
December 31, 2016 . . . . . . . . . . . . . . .
December 31, 2015 . . . . . . . . . . . . . . .

$518
$614
$378

$333
$195
$294

Barter Transactions

Allowance
From
Acquisitions
(in thousands)
$181
$ —
$ 99

Write Off of
Uncollectible
Accounts, Net
of Recoveries

Balance at
End of Period

$(305)
$(291)
$(157)

$727
$518
$614

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 2017, 2016 and 2015.

Property and equipment consisted of the following:

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

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

Estimated
Useful Life

December 31,

2017

2016

(In thousands)

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

— $ 13,594
34,905
24,538
52,534
6,822
3,463
135,856
(79,621)
$ 56,235

$ 12,307
32,046
23,066
56,745
7,261
3,255
134,680
(85,506)
$ 49,174

Depreciation expense for continuing operations for the years ended December 31, 2017, 2016 and 2015 was

$5,391,000, $5,234,000 and $5,194,000, respectively. Depreciation expense for discontinued operations for
the years ended December 31, 2017, 2016 and 2015 was $445,000, $1,387,000 and $1,399,000, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

Intangible Assets

Intangible assets deemed to have indeﬁnite useful lives, which include broadcast licenses and goodwill,
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 108 broadcast licenses serving 26 markets, which require renewal over the period of
2019 − 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 length, ranging from ﬁve to
twenty-six years. Other intangibles are amortized over one to ﬁfteen years. Customer relationships are
amortized over three 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, 2017, 2016 and 2015, we recognized interest expense related
to the amortization of debt issuance costs of $53,000, $53,000 and $131,000, respectively. In 2015 we
wrote-off unamortized debt issuance costs of $557,000, pre-tax, in connection with our new credit facility. See
Note 4 — Long-Term Debt.

At December 31, 2017 and 2016 the net book value of debt issuance costs related to our line of credit

was $138,000, and $191,000, respectively, and was presented in other intangibles, deferred costs and
investments in our Consolidated Balance Sheets.

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, 2017, we had remaining
authorization of $22.4 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 2017, 2016 and 2015, we acquired 37,141 shares at an average price of $47.72
per share, 18,612 shares at an average price of $40.06 per share and 129,384 shares at an average price of
$36.53 per share, respectively.

Revenue Recognition

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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

Local Marketing Agreements

We have entered into Local Marketing Agreements (‘‘LMA’s’’) in certain markets. In a typical 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 LMA’s are included in the
accompanying Consolidated Statements of Income. Assets and liabilities related to the LMA’s are included in
the accompanying Consolidated Balance Sheets.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. Such costs related to our continuing

operations amounted to $2,441,000, $2,633,000 and $2,475,000 for the years ended December 31, 2017, 2016
and 2015, respectively. Advertising and promotion costs related to our discontinued operations amounted to
$240,000, $341,000 and $328,000 for the years ended December 31, 2017, 2016 and 2015, 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 7, 2017, the Company’s Board of Directors declared a quarterly cash dividend of $0.30 per

On May 3, 2017, the Company’s Board of Directors declared a regular cash dividend of $0.30 per share

On November 21, 2016 the Company’s Board of Directors declared a quarterly cash dividend of $0.30

per share and a special cash dividend of $0.20 per share on its Classes A and B shares. This dividend totaling
$2.9 million was paid on December 23, 2016 to shareholders of record on December 5, 2016.

On August 30, 2016, the Company’s Board of Directors declared a regular cash dividend of $0.30 per
share on its Classes A and B Common Stock. This dividend, totaling $1.8 million was paid on September 30,
2016 to shareholders of record on September 14, 2016.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

On June 1, 2016, the Company’s Board of Directors declared a regular cash dividend of $0.25 per share

on its Classes A and B Common Stock. This dividend, totaling $1.5 million, was paid on July 8, 2016 to
shareholders of record on June 15, 2016.

On March 2, 2016, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.25

per share on its Classes A and B Common Stock. This dividend, totaling $1.5 million, was paid on April 15,
2016 to shareholders of record on March 28, 2016.

On November 17, 2015 the Company’s Board of Directors declared a quarterly cash dividend of

$0.25 per share and a special cash dividend of $0.25 per share on its Classes A and B Common Stock.
This dividend totaling $2.9 million was paid on December 11, 2015 to shareholders of record on
November 30, 2015.

On September 2, 2015 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 $1.2 million was paid on October 2, 2015
to shareholders of record on September 14, 2015.

On June 10, 2015 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 $1.2 million was paid on July 10, 2015
to shareholders of record on June 22, 2015.

On March 25, 2015 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 $1.2 million was paid on April 6, 2015 to
shareholders of record on April 17, 2015.

Stock-Based Compensation

Stock-based compensation cost for stock option awards is estimated on the date of grant using a

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

Earnings Per Share

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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

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

Years Ended December 31,
2017
2016
(In thousands, except per share data)

2015

Numerator:

Income from continuing operations . . . . . . . . . . . . . . . . . . .
Less: Income allocated to unvested participating securities . . .
Income from continuing operations available to common

$22,246
370

$12,910
231

$ 9,146
171

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$21,876

$12,679

. . . . . . . . . . . . . . . . .
Income from discontinued operations
Less: Income allocated to unvested participating securities . . .
Income from discontinued operations available to common

$32,471
541

$ 5,276
94

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$31,930

$ 5,182

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

$53,806

$17,861

$ 8,975

$ 4,268
80

$ 4,188

$13,163

Denominator:

Denominator for basic earnings per share-weighted average

shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,803

5,761

5,706

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

weighted-average shares and assumed conversions . . . . . . .

5,807

5,771

5,740

Basic earnings per share:

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

3.77
5.50
$ 9.27

Diluted earnings per share

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

3.77
5.50
9.27

2.20
0.90
3.10

2.19
0.90
3.09

1.58
0.73
2.31

1.56
0.73
2.29

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 0, 0 and 0 for
the years ended December 31, 2017, 2016, and 2015, 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.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, ‘‘Income Taxes

(Topic 740), Balance Sheet Classiﬁcation of Deferred Taxes’’ (‘‘ASU 2015-17’’), which requires companies to
classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred
taxes into current and noncurrent amounts. This amendment was adopted on January 1, 2017 on a
retrospective basis. As a result we have reclassiﬁed approximately $1,022,000 of current deferred tax assets
into the noncurrent deferred tax liability line item within the Condensed Consolidated Balance Sheet for the
period ended December 31, 2016.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

In March 2016, the FASB issued ASU No. 2016-09, ‘‘Compensation — Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting’’ (‘‘ASU 2016-09’’), which includes multiple
amendments intended to simplify aspects of share-based payment accounting. Amendments to the timing of
when excess tax beneﬁts are recognized, minimum statutory withholding requirements, and forfeitures will be
applied using a modiﬁed retrospective transition method through a cumulative-effect adjustment to equity as of
the beginning of the period of adoption. Amendments to the presentation of employee taxes paid on the
statement of cash ﬂows when an employer withholds shares to meet the minimum statutory withholding
requirement will be applied retrospectively, and amendments requiring the recognition of excess tax beneﬁts
and tax deﬁciencies in the income statement are to be applied prospectively. This amendment was adopted on
January 1, 2017 and did not have a material impact on our consolidated ﬁnancial statements.

Recent Accounting Pronouncements — Not Yet Adopted

In May 2017, the FASB issued ASU 2017-09, ‘‘Compensation — Stock Compensation (Topic 718), Scope
of Modiﬁcation Accounting)’’ (‘‘ASU 2017-09’’) which clariﬁes when changes to the terms or conditions of a
share-based payment award must be accounted for as modiﬁcations. The new guidance will reduce diversity in
practice and result in fewer changes to the terms of an award being accounted for as modiﬁcations.
ASU 2017-09 will be applied prospectively to awards modiﬁed on or after the adoption date. The guidance is
effective for annual periods, and interim periods within those annual periods beginning after December 15,
2017, with early adoption permitted. The Company is currently evaluating the impact that this standard will
have on our consolidated ﬁnancial statements.

In January 2017, the FASB issued ASU 2017-04, ‘‘Intangibles — Goodwill and Other (Topic 350)’’

(‘‘ASU 2017-04’’) which removes step 2 from the goodwill impairment test. Under the new guidance, if a
reporting unit’s carrying amount exceeds it fair value, an entity will record an impairment charge based on
that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting
unit. ASU 2017-04 will be applied prospectively and is effective for ﬁscal years and interim impairment tests
performed in periods beginning after December 15, 2019 with early adoption permitted. The Company is
currently evaluating the impact of adopting this standard on our consolidated ﬁnancial statements.

In August 2016, the FASB issued ASU No. 2016-15, ‘‘Classiﬁcation of Certain Cash Receipts and Cash

Payments (Topic 230): Statement of Cash Flows’’ (‘‘ASU 2016-15’’), which clariﬁes how entities should
classify certain cash receipts and cash payments on the statement of cash ﬂows. ASU 2016-15 also clariﬁes
how the predominance principle should be applied when cash receipts and cash payments have aspects of
more than one class of cash ﬂows. ASU 2016-15 is effective for ﬁscal years and interim periods beginning
after December 15, 2017. The Company is currently evaluating the impact that this standard will have on our
consolidated ﬁnancial statements.

In June 2016, the FASB issued ASU No. 2016-13, ‘‘Financial Instruments — Credit Losses

(Topic 326): Measurement of Credit Losses on Financial Instruments’’ (‘‘ASU 2016-13’’), which amends
guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt
securities. ASU 2016-13 is effective for ﬁscal years and interim periods beginning after December 15, 2019.
The Company is currently evaluating the impact that this standard will have on our consolidated ﬁnancial
statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, ‘‘Leases (Topic 842)’’
(‘‘ASU 2016-02’’), which requires that all leases with a term of more than one year, covering leased assets
such as real estate, broadcasting towers and equipment, be reﬂected on the balance sheet as assets and
liabilities for the rights and obligations created by these leases. ASU 2016-02 is effective for ﬁscal years
ﬁscal years and interim periods beginning after December 15, 2018. While the Company is currently
reviewing the effects of this guidance, the Company believes that this would result in an increase in the assets
and liabilities reﬂected on the Company’s consolidated balance sheets. We are still evaluating the impact on
our consolidated statements of operations.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Signiﬁcant Accounting Policies − (continued)

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, ‘‘Revenue from Contracts
with Customers’’ (‘‘ASU 2014-09’’), which 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 FASB has also issued a number of updates to this standard. This
standard is effective for the ﬁscal and interim periods beginning January 1, 2018. The Company adopted the
new guidance on January 1, 2018, using the modiﬁed retrospective method, with no impact on its 2017
ﬁnancial statements. The cumulative effect of initially applying the new guidance had no impact on the
opening balance of retained earnings as of January 1, 2018. The Company does not expect the new guidance
to have a material impact on its ﬁnancial statements in future periods. However, additional disclosures will be
included in future reporting periods in accordance with requirements of the new guidance.

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.

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 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.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

Broadcast Licenses

We have recorded the changes to broadcast licenses for the years ended December 31, 2017 and 2016 as

follows:

Balance at January 1, 2016 . . . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2016 . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2017 . . . . . . . . . . . . . . . . .

2017 Impairment Test

Continuing
Operations

$78,499
8,123
$86,622
8,086
—
(1,449)
$93,259

Discontinued
Operations
(In thousands)
$ 9,607
—
$ 9,607
—
(9,607)
—
$ —

Total

$88,106
8,123
$96,229
8,086
(9,607)
(1,449)
$93,259

We completed our annual impairment test of broadcast licenses during the fourth quarter of 2017 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, Springﬁeld, Illinois, and recorded non-cash impairment charge
of $1,449,000 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 2017 were primarily due to
declines in available market revenue, market revenue share, proﬁt margins and estimated long-term growth
rates in our Springﬁeld, Illinois market.

The following table reﬂects certain key estimates and assumptions used in the impairment test in the
fourth quarter of 2017. The ranges for operating proﬁt margin and market long-term revenue growth rates vary
by market. In general, when comparing between 2017, 2016 and 2015: (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 0.8% lower
than previously projected for 2017.

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

Fourth
Quarter 2017
12.4% − 12.5%
19.0% − 36.4%
1.1% − 3.5%

Fourth
Quarter 2016
12.3% − 12.4%
19.5% − 36.4%
1.0% − 2.9%

Fourth
Quarter 2015
12.2% − 12.4%
19.5% − 36.4%
1.3% − 3.1%

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.

2016 Impairment Test

During the fourth quarter of 2016, 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.

2015 Impairment Test

We completed our annual impairment test of broadcast licenses during the fourth quarter of 2015 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

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

$874,000 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 2015 were primarily due to
declines in available market revenue, market revenue share, proﬁt margins and estimated long-term growth
rates in our Columbus, Ohio market.

Goodwill

During the fourth quarter of 2017, 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 our continuing operations
was in excess of its carrying value.

We have recorded the changes to goodwill for each of the years ended December 31, 2017 and 2016 as

follows:

Balance at January 1, 2016 . . . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2016 . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
Balance at December 31, 2017 . . . . . . . . . . . . . . . . .

Continuing
Operations

$ 2,874
4,533
$ 7,407
8,151
$15,558

Discontinued
Operations
(In thousands)
$—
—
$—
—
$—

Total

$ 2,874
4,533
$ 7,407
8,151
$15,558

Other Intangible Assets

We have recorded amortizable intangible assets at December 31, 2017 as follows:

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

Gross
Carrying
Amount

$ 3,861
5,965
3,546
1,834
$15,206

Accumulated
Amortization
(In thousands)
$ 3,861
5,468
1,529
1,630
$12,488

We have recorded amortizable intangible assets at December 31, 2016 as follows:

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

Gross
Carrying
Amount

$ 3,861
5,763
1,744
1,920
$13,288

Accumulated
Amortization
(In thousands)
$ 3,861
5,439
747
1,682
$11,729

Net
Amount

$ —
497
2,017
204
$2,718

Net
Amount

$ —
324
997
238
$1,559

Aggregate amortization expense for these intangible assets for the years ended December 31, 2017, 2016
and 2015, was $860,000, $642,000 and $231,000, respectively. Our estimated annual amortization expense for
the years ending December 31, 2018, 2019, 2020, 2021 and 2022 is $1,094,000, $691,000, $475,000, $49,000
and $39,000, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

3. Discontinued Operations

On May 9, 2017 we entered into a deﬁnitive agreement to sell our Joplin, Missouri and Victoria, Texas

television stations (‘‘Television Sale’’) for approximately $66.6 million, subject to certain adjustments, to
Evening Telegram Company d/b/a Morgan Murphy Media. The Television Sale was completed on
September 1, 2017 and the Company received net proceeds of $69.5 million which included the sales price of
$66.6 million, the sale of accounts receivable of approximately $3.4 million, offset by certain closing
adjustments and transactional costs of $500 thousand. The Company recognized a pretax gain of $50.8 million
as a result of the Television Sale in the third quarter of 2017. The gain net of tax for the Television Sale was
$29.9 million. Effective September 1, 2017, the Company used $24.2 million of the proceeds from the
Television Sale to ﬁnance the acquisition of radio stations in South Carolina, which included the purchase
price of $23 million, the purchase of $1.3 million in accounts receivable offset by certain closing adjustments
and transactional costs of approximately $50,000 (as described in Note 9). On October 5, 2017 and
November 3, 2017, the Company used $5,287,000 and $5,000,000 respectively of the proceeds from the
Television Sale to pay down a portion of its Revolving Credit Facility (as deﬁned and described in Note 4).

In accordance with authoritative guidance we have reported the results of operations of the Joplin,
Missouri and Victoria, Texas television stations as discontinued operations in the accompanying consolidated
ﬁnancial statements. For all previously reported periods, certain amounts in the consolidated ﬁnancial
statements have been reclassiﬁed. All of the assets and liabilities of the Joplin, Missouri and Victoria, Texas
television stations have been classiﬁed as discontinued operations and the net results of operations have been
reclassiﬁed from continuing operations to discontinued operations. These were previously included in the
Company’s television segment.

The following table shows the components of the results from discontinued operations associated with the

Television Sale as reﬂected in the Company’s Consolidated Statements of Operations (in thousands):

Net operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
Station operating expense(1)
. . . . . . . . . . . . . . . . . . . . . .
Other operating (income) expense . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . .
. . . .
Pretax gain on the disposal of discontinued operations
Total pretax gain on discontinued operations . . . . . . . . . . .
Income tax expense(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . .

Year Ended December 31,
2016
$23,636
14,743
(42)
8,935
32
—
8,903
—
8,903
3,627
$ 5,276

2015
$21,064
14,080
32
6,952
33
(417)
7,336
—
7,336
3,068
$ 4,268

2017(5)
$14,238
9,757
31
4,450
21
—
4,429
50,842
55,271
22,800
$32,471

(1) No depreciation expense was recorded by the Company beginning May 9, 2017, the date the Television

(2)

segment assets’ were held for sale.
Interest expense related to the Surtsey debt that is guaranteed by the Television stations. Our affiliate
repaid this loan when the television stations were sold on September 1, 2017.

(3) Other income in 2015 relates to a gain on an insurance claim.
(4) The effective tax rates on pretax income from discontinued operations were approximately 41%.
(5) Results of operations for the Television stations are reﬂected through August 31, 2017. The effective date

of the sale was September 1, 2017.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

3. Discontinued Operations − (continued)

The following table is a summary of the assets and liabilities of discontinued operations (in thousands):

Major Classes of Current Assets of Discontinued Operations

Accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . .
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total of current assets of discontinued operations . . . . . . . . . . . . .

Major Classes of Non-Current Assets of Discontinued Operations

Property and equipment, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . .
Broadcast licenses, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles, deferred costs and investments, net(1)
. . . . . . . .
Total of non-current assets of discontinued operations . . . . . . . . . .

Total Assets Classiﬁed as Part of Discontinued Operations in the

December 31,
2017

December 31,
2016

$ —
—
—
$ —

$ 3,868
625
132
$ 4,625

$ 7,388
9,607
1,053
$18,048

Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . .

$ —

$22,673

Major Classes of Current Liabilities of Discontinued Operations

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long term debt
. . . . . . . . . . . . . . . . . . . . . . .
Other liabilities(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Total of current liabilities of discontinued operations

Major Classes of Current Liabilities of Discontinued Operations

Other liabilities(1)
Total of non-current liabilities of discontinued operations

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

Total Liabilities Classiﬁed as Part of Discontinued Operations in

$ —
—
—
—
$ —

$ —
$ —

759
163
1,078
971
$ 2,971

$ 1,058
$ 1,058

the Condensed Consolidated Balance Sheets

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

$ —

$ 4,029

Net Assets Classiﬁed as Part of Discontinued Operations in the

Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . .

$ —

$18,644

(1) For prior periods, the current and long-term classiﬁcation of assets and liabilities does not change as they
did not meet the held-for-sale criteria the prior periods. We closed the disposition on September 1, 2017,
therefore all amounts in the current year are considered current assets or liabilities of discontinued
operations.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

3. Discontinued Operations − (continued)

The following table represents the components of the results from discontinued operations associated with

the Television Sale as reﬂected in the Company’s unaudited Condensed Consolidated Statements of Cash
Flows (in thousands):

December 31,
2017

December 31,
2016

December 31,
2015

Cash paid during the period

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

$
21
23,260

$
32
2,677

Signiﬁcant operating non-cash items
Depreciation and amortization(1)
. . . . . . . . . . . . . .
Broadcast program rights amortization . . . . . . . . . .
Barter revenue, net
. . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property and equipment . . . . . . . . . .
Loss (gain) on sale of assets . . . . . . . . . . . . . . . . .
Pretax gain on television sale . . . . . . . . . . . . . . . .

Signiﬁcant investing items

Acquisition of property and equipment . . . . . . . . . .
Proceeds from sale and disposal of assets . . . . . . . .
Net proceeds from sale of television stations(2)
. . . .
Proceeds from insurance claim . . . . . . . . . . . . . . .

445
418
18
—
31
50,842

335
—
69,528
—

$1,387
628
32
43
(42)
—

$ 894
(59)
—
—

$
33
1,972

$1,399
637
(50)
3
32
—

$1,973
(3)
—
(777)

(1) No depreciation expense was recorded by the Company beginning May 9, 2017, the date the Television

segment assets’ were held for sale.

(2) Net proceeds from the sale of the television stations reﬂect the sales price of $66.6 million, the sale of

accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional
costs of approximately $500 thousand.

4. Long-Term Debt

Long-term debt consisted of the following:

Credit Facility:

Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts payable within one year . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2017

December 31,
2016

(In thousands)

$25,000
—
$25,000

$35,287
—
$35,287

Future maturities of long-term debt are as follows:

Year Ending December 31,

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
(In thousands)
$ —
—
25,000
—
—
—
$25,000

Saga Communications, Inc.

Notes to Consolidated Financial Statements

4. Long-Term Debt − (continued)

On August 18, 2015, we entered into a new credit facility (the ‘‘Credit Facility’’) with JPMorgan Chase
Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P. Morgan Securities
LLC. In connection with the execution of the Credit Facility, the credit agreement in place at June 30, 2015
(the ‘‘Old Credit Agreement’’) was terminated, and all outstanding amounts were paid in full. The Credit
Facility consists of a $100 million ﬁve-year revolving facility (the ‘‘Revolving Credit Facility’’) and matures
on August 18, 2020.

The proceeds from the Credit Facility were used to repay all amounts outstanding on our Old Credit
Agreement and pay transactional fees. 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. We wrote-off unamortized debt issuance costs relating to
the Old Credit Agreement of approximately $557,000, pre-tax, due to entering into this new agreement during
the year ended December 31, 2015.

Approximately $266,000 of debt issuance costs related to the Credit Facility were capitalized and are
being amortized over the life of the Credit Facility. These debt issuance costs are included in other assets, net
in the consolidated balance sheets.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR (1.375%
at December 31, 2017), plus 1% to 2% or the base rate plus 0% to 1%. The spread over LIBOR and the base
rate vary from time to time, depending upon our ﬁnancial leverage. Letter of credit issued under the Credit
Facility will be subject to a participation fee (which is equal to the interest rate applicable to Eurocurrency
Loans, as deﬁned in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25%
per annum payable to the issuing bank. We also pay quarterly commitment fees of 0.2% to 0.3% 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

We had approximately $75 million of unused borrowing capacity under the Revolving Credit Facility at

December 31, 2017.

On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000, respectively

of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility.

The loan agreement of approximately $1.1 million of secured debt of affiliate was amended in April,
2017 to extend the due date of the loan for three years to mature on May 1, 2020. Our affiliate repaid this
loan when the television stations were sold on September 1, 2017.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

5. Supplemental Cash Flow Information

2017

Years Ended December 31,
2016
(In thousands)

2015

Cash paid during the period for:

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

Non-cash transactions:

Barter revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barter expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury shares in connection with exercise of

stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property and equipment
. . . . . . . . . . . . . . . .
Acquisition of broadcast properties . . . . . . . . . . . . . . . . . . .
Use of treasury shares for 401(k) match . . . . . . . . . . . . . . . .

$ 850
$2,420

$3,618
$3,367

$ 826
$
8
$ —
$ 274

6. Income Taxes

$ 636
$6,555

$3,471
$3,217

$ —
$
49
$ —
$ 258

$ 718
$4,192

$3,433
$3,270

$3,294
44
$
$
50
$ 244

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred

to as the Tax Cuts and Jobs Act (the ‘‘Tax Act’’). The Tax Act makes broad and complex changes to the
U.S. tax code, including, but not limited to, the following that impact us: (1) reducing the U.S. federal
corporate income tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum
tax (‘‘AMT’’) and changing how existing AMT credits can be realized; (3) creating a new limitation on
deductible interest expense; (4) repealing the domestic production activities deduction; (5) limiting the
deductibility of certain executive compensation; and (6) limiting certain other deductions.

The SEC staff issued Staff Accounting Bulletin No. 118 (‘‘SAB 118’’), which provides guidance on
accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend
beyond one year from the Tax Act enactment date for companies to complete the accounting relating to the
Tax Act under ASC 740. In accordance with SAB 118, a company must reﬂect the income tax effects of those
aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s
accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable
estimate, it must record a provisional estimate in its ﬁnancial statements. If a company cannot determine a
provisional estimate to be included in its ﬁnancial statements, it should continue to apply ASC 740 on the
basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with our initial analysis of the impact of the Tax Act, we have recorded a provisional
amount of net tax beneﬁt of $11.5 million in the year ended December 31, 2017 related to the remeasurement
of our deferred tax balance and other effects. For various reasons including those discussed below, we have
not fully completed our accounting for the income tax effects of the Tax Act. As we were able to make
reasonable estimates of the effects of the Tax Act, we recorded provisional amounts.

In connection with the adoption of the Tax Act, we:

— Remeasured certain deferred tax assets and liabilities based on the rates at which they are expected
to reverse in the future, which is generally at a federal rate of 21%. However, we are still analyzing
certain aspects of the Tax Act and reﬁning our calculations, which could potentially affect the
measurement of these balances or potentially give rise to new deferred tax amounts. Our ﬁnancial
statements include provisional amounts for the impacts of deferred tax revaluation.

— Evaluated the future deductibility of executive compensation due to the elimination of the

performance-based exception as well as the modiﬁcation of who is treated as a covered person in
connection with limiting the deduction. As part of the Tax Act, there is a transition rule for written,

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes − (continued)

binding contracts in place prior to November 2, 2017 related to executive compensation, that have
not been modiﬁed in any material respect. Further guidance is needed to fully determine the impact
of these provisions. Our ﬁnancial statements include provisional amounts for the impacts of the
changes to the deductibility of executive compensation.

— Performed initial evaluations of the state conformity to the Tax Act. We continue to assess the
conformity of each state in which we operate to the Tax Act. Our ﬁnancial statements include
provisional amounts for the impacts of state conformity.

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

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

December 31,

2017

2016

(In thousands)

Deferred tax liabilities:

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

$ 4,333
17,640
317
22,290

Deferred tax assets:

Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . .
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

116
1,058
44
1,218
—
1,218
$ 21,072
$
300
(21,372)
$(21,072)

$ 6,858
24,987
619
32,464

224
2,421
78
2,723
—
2,723
$ 29,741
$ 1,022
(30,763)
$(29,741)

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, 2017 and December 31,
2016, we do not have a valuation allowance for net deferred tax assets.

At December 31, 2017 and 2016, net deferred tax liabilities include a deferred tax asset of $1,175,000
and $2,723,000, respectively, relating to deferred compensation, stock-based compensation expense, accrued
compensation, the allowance for doubtful accounts, and other accrued expenses.

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

2017

Years Ended December 31,
2016
(In thousands)

2015

Current:

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Income Tax Provision . . . . . . . . . . . . . . . . . . .

$ 2,545
(255)
2,290
(8,210)
$(5,920)

$5,616
1,010
6,626
2,247
$8,873

$3,307
784
4,091
2,481
$6,572

Saga Communications, Inc.

Notes to Consolidated Financial Statements

6. Income Taxes − (continued)

In addition, we recognized a tax expense (beneﬁt) of ($100,000), $0, and $230,000 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, 2017, 2016 and 2015, 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 (beneﬁt), net of federal beneﬁt . . . . .
Other, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal tax reform − deferred tax rate change . . . . . . .

Years Ended December 31,
2016
(In thousands)
$7,665
926
282
—
$8,873

2015

$5,401
760
411
—
$6,572

2017

$ 5,716
(769)
633
(11,500)
$ (5,920)

The 2017 effective tax rate differs from the federal statutory rate primarily due to the impacts of the Tax

Act and state income tax beneﬁt on current year earnings. The 2016 effective tax rate exceeds the federal
statutory rate primarily due to state income taxes.

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 2014. During the ﬁrst quarter of 2015, the IRS commenced an examination of the
Company’s 2013 U.S. federal income tax return which was completed in the ﬁrst quarter of 2016 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, 2017, and 2016 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, 2017, 2016 and 2015, we had no
tax-related interest or penalties and had $0 accrued at December 31, 2017 and 2016.

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 Company will
request stockholder approval at the 2018 Annual Meeting of Stockholders to amend the Second Restated 2005
Plan to extend the date for making awards to September 6, 2023.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Stock-Based Compensation − (continued)

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

Stock-Based Compensation

The Company’s stock-based compensation expense is measured and recognized for all stock-based
awards to employees using the estimated fair value of the award. Compensation expense is recognized over
the period during which an employee is required to provide service in exchange for the award. For these
awards, we have recognized compensation expense using a straight-line amortization method. Accounting
guidance requires that stock-based compensation expense be based on awards that are ultimately expected to
vest; therefore stock-based compensation has been adjusted for estimated forfeitures. When estimating
forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures.

All 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, 2017, 2016 and 2015. 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, 2015 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2015 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2016 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2017 . . . . . . . . . . .
Vested and Exercisable at December 31, 2017 . . .

Weighted
Average
Exercise
Price
$31.79
—
27.09
43.47
$28.47
—
—
—
$28.47
—
28.47
—
$ —
$ —

Weighted
Average
Remaining
Contractual
Term (Years)
1.2

Aggregate
Intrinsic
Value
$2,519,147

1.4

$ 289,769

0.4

$ 633,834

—
—

$
$

—
—

Number of
Options
213,170
—
(125,354)
(58,781)
29,035
—
—
—
29,035
—
(29,035)
—
—
—

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, 2017, 2016 and

2015 was $664,321, $0, and $1,120,153, respectively. Cash received from stock options exercised during
the years ended December 31, 2017, 2016 and 2015 was $354, $0 and $101,200, respectively.

There were no options granted during 2017, 2016 and 2015 and there were no stock options outstanding

as of December 31, 2017.

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

Outstanding at January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested and outstanding at December 31, 2017 . . . . . . . . . . . . .
Weighted average remaining contractual life (in years) . . . . . . . . . . .

Weighted
Average Grant
Date Fair
Value
$41.20
40.09
42.11
43.62
$40.28
48.60
41.20
38.83
$43.73
44.20
42.13
46.23
$44.85

Shares
89,832
55,081
(36,142)
(1,982)
106,789
48,471
(51,368)
(630)
103,262
48,780
(54,598)
(805)
96,639
2.2

The weighted average grant date fair value of restricted stock that vested during 2017, 2016 and 2015
was $2,300,000, $2,116,000 and $1,522,000, respectively. The net value of unrecognized compensation cost
related to unvested restricted stock awards aggregated $4,063,000, $4,223,000 and $3,993,000 at
December 31, 2017, 2016 and 2015, respectively.

For the years ended December 31, 2017, 2016 and 2015 we had $2,279,000, $2,101,000 and $1,655,000,

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, 2017, 2016 and 2015 was $912,000, $840,000 and
$662,000, respectively.

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
$1,700, $1,200 and $2,300 in 2017, 2016 and 2015, respectively. The Company’s discretionary contribution to
the plan was approximately $255,000, $275,000 and $250,000 for the years ended December 31, 2017, 2016
and 2015, respectively.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

8. Employee Beneﬁt Plans − (continued)

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, 2017, 2016 and 2015
was $211,000, $184,000 and $138,000, 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. 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.

2017 Acquisitions and Dispositions

On May 9, 2017 we entered into a deﬁnitive agreement to sell our Joplin, Missouri and Victoria, Texas

television stations for approximately $66.6 million, subject to certain adjustments, to Evening Telegram
Company d/b/a Morgan Murphy Media. The Television Sale was completed on September 1, 2017 and the
Company received net proceeds of $69.5 million which included the sales price of $66.6 million, the sale of
accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs
of approximately $500 thousand.

On May 9, 2017, the Company entered into an Asset Purchase Agreement with Apex Media Corporation

and Pearce Development, LLC f/k/a Apex Real Property, LLC to purchase radio stations principally serving
the South Carolina area for approximately $23 million (subject to certain purchase price adjustments) plus the
right to air certain radio commercials, substantially all the assets related to the operation of the following
radio stations: WCKN(FM), WMXF(FM), WXST(FM), WAVF(FM), WSPO(AM), W261DG, W257BQ,
WVSC(FM), WLHH(FM), WOEZ(FM), W256CB, W293BZ. The Company closed this transaction effective
September 1, 2017, simultaneously with the closing of the Television Sale using funds generated from the
Television Sale of $24.2 million, which included the purchase price of $23 million, the purchase of
$1.3 million in accounts receivable offset by certain closing adjustments and transactional costs of
approximately $50,000. Management attributes the goodwill recognized in the acquisition to the power of the
existing brands in the Charleston, South Carolina and Hilton Head, South Carolina market as well as synergies
and growth opportunities expected through the combination with the Company’s existing stations.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. Acquisitions and Dispositions − (continued)

On January 16, 2017, we entered into an asset purchase agreement to purchase an FM radio station

(WCVL) from WUVA, Incorporated, serving the Charlottesville, Virginia market for approximately
$1,658,000, which included $8,000 in transactional costs. Simultaneously, we entered into a LMA to begin
operating the station on February 1, 2017. We completed this acquisition on April 18, 2017. This acquisition
was ﬁnanced through funds generated from operations. Unaudited proforma results of operations for this
acquisition are not required, as such information is not material to our ﬁnancial statements and therefore is not
presented in the pro forma tables in the following pages.

2016 Acquisitions

On November 2, 2015, we entered into an agreement to acquire an FM radio station (WLVQ) from Wilks

Broadcast Columbus, LLC, serving the Columbus, Ohio market for approximately $13,791,000, which
included $734,000 in accounts receivable and $57,000 in transactional costs. We completed this acquisition on
February 3, 2016. We operated this station under a LMA from November 16, 2015 through the completion of
the acquisition. This acquisition was ﬁnanced through funds generated from operations. Management attributes
the goodwill recognized in the acquisition to the power of the existing brands in the Columbus, Ohio market
as well as the synergies and growth opportunities expected through the combination with the Company’s
existing stations.

On March 16, 2016 we acquired an FM translator serving the Portland, Maine market for

approximately $50,000.

On March 25, 2016 we acquired an FM translator serving the Milwaukee, Wisconsin market for

approximately $50,000.

On April 8, 2016 we acquired an FM translator serving the Charlottesville, Virginia market for

approximately $100,000.

On April 11, 2016 we acquired an FM translator serving the Clarksville, Tennessee market for

approximately $30,000.

On June 3, 2016 we acquired an FM translator serving the Spencer, Iowa market for

approximately $35,000.

On August 11, 2016 we acquired two FM translators serving the Bellingham, Washington market for

approximately $50,000.

On September 12, 2016 we acquired an FM translator serving the Portland, Maine market for

approximately $45,000.

On October 11, 2016 we acquired a FM Translator serving the Bellingham, Washington market for

approximately $25,000.

On November 8, 2016 we acquired a FM Translator serving the Des Moines, Iowa market for

approximately $25,000.

On November 14, 2016 we acquired a FM Translator serving the Springﬁeld, Illinois market for

approximately $23,000.

On December 2, 2016 we acquired a FM Translator serving the Ithaca, New York market for

approximately $35,000.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. Acquisitions and Dispositions − (continued)

Condensed Consolidated Balance Sheet of 2017 and 2016 Acquisitions:

The following condensed balance sheets represent the estimated fair value assigned to the related assets

and liabilities of the 2017 and 2016 acquisitions at their respective acquisition dates.

Condensed Consolidated Balance Sheet of 2017 and 2016 Acquisitions

Acquisitions in

2017

2016

(In thousands)

Assets Acquired:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment

$ 1,335
6,678

814
375

Other assets:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broadcast licenses
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Other intangibles, deferred costs and investments
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities Assumed:
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,086
8,151
2,019
18,256
26,269

413
413
$25,856

8,123
4,533
398
13,054
14,243

41
41
$14,202

Pro Forma Results of Operations for Acquisitions (Unaudited)

The following unaudited pro forma results of our operations for the years ended December 31, 2017 and

2016 assume the 2017 and 2016 acquisitions occurred as of January 1, 2016. The translators are start-up
stations and therefore, have no pro forma revenue and expenses. The pro forma results give effect to certain
adjustments, including depreciation, amortization of intangible assets, increased interest expense on acquisition
debt and related income tax effects. The pro forma results have been prepared for comparative purposes only
and do not purport to indicate the results of operations which would actually have occurred had the
combinations been in effect on the dates indicated or which may occur in the future.

Years Ended December 31,
2017

2016

(In thousands, except per share data)

Pro forma Consolidated Results of Operations
Net operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Station operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating (income) expenses, net
Impairment of intangible assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income tax expense . . . . . . . . . .
Income tax (beneﬁt) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$123,651
92,563
11,657
55
1,449
17,927
903
17,024
(5,634)
22,658
32,471
$ 55,129

$126,789
93,818
10,980
(1,351)
—
23,342
744
22,598
9,207
13,391
5,276
$ 18,667

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. Acquisitions and Dispositions − (continued)

Basic earnings per share:

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

Diluted earnings per share:

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

10. Related Party Transactions

Principal Stockholder Employment Agreement

Years Ended December 31,
2017

2016

(In thousands, except per share data)

$3.84
5.50
$9.34

$2.28
0.90
$3.18

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. On February 12, 2016 we entered into an amendment to the agreement. The
amendment extends the term of the employment agreement to March 31, 2021. The amendment also states
that on each anniversary of the effective date of the employment agreement, the Company’s Compensation
committee shall determine in its discretion the amount of any annual increases (which shall not be less than
the greater of 4% or a deﬁned cost of living increase). Mr. Christian may defer any or all of his annual salary.

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

and/or stock grants in amounts determined by the Compensation Committee and will continue to participate in
the Company’s beneﬁt plans. The Company will maintain insurance policies, will furnish an automobile, will
pay for an executive medical plan and will maintain an office for Mr. Christian at its principal executive
offices and in Sarasota County, Florida. The amendment adds that the Company is authorized to pay for
Mr. Christian’s tax preparation services on an annual basis and that this amount will be subject to income tax
as additional compensation. 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, 2017 Mr. Christian’s average
annual compensation, as deﬁned by the employment agreement was approximately $1,759,000.

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. The amendment also entitles
Mr. Christian to receive severance pay equal to 100% of his then base salary for 24 months payable in equal
monthly installments and after the date upon which notice of termination is given, any unvested or
time-vested stock options previously granted to Mr. Christian by the Company shall become immediately one
hundred percent (100%) vested to the extent permitted by law.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Related Party Transactions − (continued)

On December 21, 2015, Mr. Christian agreed to defer approximately $100,000 of his 2016 salary which

was paid 100% on January 6, 2017. On December 13, 2016, Mr. Christian agreed to defer approximately
$100,000 of his 2017 salary to be paid 100% on January 5, 2018. On December 5, 2017, Mr. Christian agreed
to defer approximately $100,000 of his 2018 salary to be paid 100% on January 4, 2019.

Change in Control Agreements

In December 2007, Samuel D. Bush, Senior Vice President and Chief Financial Officer, Warren S. Lada,

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

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

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

Transactions with Affiliate and Other Related Party Transactions

Until the Television Sale (discussed in Note 3) Surtsey Media, LLC (‘‘Surtsey Media’’) owned 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 operated KVCT under a
Time Brokerage Agreement (‘‘TBA’’) with Surtsey Media which we entered into in May 1999. Under the
FCC’s ownership rules, we were prohibited from owning or having an attributable or cognizable interest in
this station. In January 2012, the TBA was amended. Pursuant to the amendment, (i) the term was 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 were increased for each extension period, and (iv) we had an exclusive option,
while the TBA was in effect, to purchase all of the assets of station KVCT, subject to certain conditions,
based on a formula. Under the amended TBA, prior to the Television Sale, during 2017, 2016 and 2015 we
paid Surtsey Media fees of approximately $3,800, $3,900 and $3,800 per month, respectively plus accounting

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Related Party Transactions − (continued)

fees and reimbursement of expenses actually incurred in operating the station. The TBA was terminated at the
time of the completion of the Television Sale of September 1, 2017.

In March 2003, we entered into an agreement of understanding with Surtsey Media whereby we had
guaranteed up to $1,250,000 of the debt incurred, in Surtsey Media closing the acquisition of a construction
permit for KFJX-TV station in Pittsburg, Kansas, a full power Fox affiliate serving Joplin, Missouri. 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’’). The station went on the air for the ﬁrst
time on October 18, 2003. Under the FCC’s ownership rules we were 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 were terminated,
(ii) the terms of the continuing Station Agreements were 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 had an exclusive option, while the Agreement for the Sale of Commercial Time and Shared
Services Agreement were 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, prior to
the Television Sale, during 2017, 2016 and 2015 we paid fees of approximately $5,200, $5,100 and $5,000
per month, respectively, plus accounting fees and reimbursement of expenses actually incurred in operating the
station. We generally prepaid Surtsey quarterly for its estimated expenses. As part of completion of the
Television Sale, the debt we guaranteed was paid in full and the amended Station Agreements were
terminated.

Surtsey Productions, Inc., the parent company of Surtsey Media, leases office space in a building owned

by us, and paid us rent of $3,000, $6,000, and $6,000 during the ﬁrst eight months of the year ended
December 31, 2017 prior to the Television Sale and the years ended December 31, 2016 and 2015,
respectively.

Saga Quad States, our fully owned subsidiary, completed the acquisition from Apex Media Corporation, a
South Carolina corporation (‘‘AMC’’), and Pearce Development, LLC f/k/a Apex Real Property, LLC, a South
Carolina limited liability company (‘‘ARP’’ and together with AMC, ‘‘Seller’’), of substantially all of Seller’s
assets related to the operation of certain radio and translator stations, upon the satisfaction of certain closing
conditions described in the Asset Purchase Agreement dated May 9, 2017 (the ‘‘Apex Agreement’’) by and
among Seller, Saga Quad States, and, solely in his role as guarantor under the Apex Agreement, G. Dean
Pearce, as further described in the Form 8-K ﬁled by Saga on May 10, 2017. Mr. Pearce is President of AMC
and ARP, and currently serves on the Board of Directors of Saga. The purchase price under the Apex
Agreement was $23,000,000.00, subject to certain purchase price adjustments, payable in cash. The purchase
price was determined through arm’s-length negotiations, and was approved by the Saga Board, and Finance
and Audit Committee, in accordance with the requirements of Saga’s Corporate Governance Guidelines for the
review of related party transactions. In connection with this agreement, we received 500 hours of service from
New Pointe Systems, a subsidiary of Pearce Development and have agreed to provide 1,000, 30 second, spots
of airtime to Pearce Development. As of December 31, 2017, we have used approximately 400 hours of
service from New Pointe Systems, leaving us with approximately 100 hours remaining and we have
approximately 1,000 spots left of 30 second spots to provide to Pearce Development. During 2017, we also
paid approximately $3,300 rent per month to Pearce Development for our Hilton Head studio and office space
beginning September 1, 2017.

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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, 2016. 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.

12. Commitments and Contingencies

Leases

We lease certain land, buildings and equipment under noncancellable operating leases. Rent expense for
our continuing operations for the year ended December 31, 2017 was $1,558,000 ($1,519,000 and $1,380,000
for the years ended December 31, 2016 and 2015, respectively).

Saga Communications, Inc.

Notes to Consolidated Financial Statements

12. Commitments and Contingencies − (continued)

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

December 31, 2017 (in thousands):

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,453
1,144
987
865
710
3,006
$8,165

Performance Fees

The Company incurs fees from performing rights organizations (‘‘PRO’’) to license the Company’s public
performance of the musical works contained in each PRO’s repertory. The Radio Music Licensing Committee,
of which the Company is a represented participant, (1) entered into an industry-wide settlement with American
Society of Composers, Authors and Publishers that was effective January 1, 2017 for a ﬁve-year term; (2) is
currently seeking reasonable industry-wide fees from Broadcast Music, Inc. effective January 1, 2017;
(3) reached an agreement with the Society of European Stage Authors and Composers that is retroactive to
January 1, 2016; and (4) ﬁled in November 2016 a motion in the U.S. District Court in Pennsylvania against
Global Music Rights (‘‘GMR’’) arguing that GMR is a monopoly demanding monopoly prices and asking the
Court to subject GMR to an antitrust consent decree. In January 2017, the Company obtained an interim
license from GMR for fees effective January 1, 2017 to avoid any infringement claims by GMR for using
GMR’s repertory without a license.

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

As deﬁned in ASC Topic 820, 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.

Our assets and liabilities disclosed at fair value are summarized below ($000’s omitted):

Financial Instrument
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . .

Fair Value

Fair Value
Hierarchy
Level 1
Level 2

December 31,
2017
$53,030
25,000

December 31,
2016
$26,697
35,287

Saga Communications, Inc.

Notes to Consolidated Financial Statements

13. Fair Value Measurements − (continued)

Our ﬁnancial instruments are comprised of cash and cash equivalents, and long-term debt. The carrying

value of cash and cash equivalents approximate fair value due to their short maturities. The fair value of cash
and cash equivalents is derived from quoted market prices and are considered a level 1. 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 2017, as a result of our annual impairment test, the Company wrote down

broadcast licenses with a carrying value of $3,649,000 to their fair value of $2,200,000, resulting in a
non-cash impairment charge of $1,449,000, which is included in net income for the year ended December 31,
2017. 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 2016, the Company reviewed the fair value of the assets that are measured
at fair value on a non-recurring basis and concluded that these assets were not impaired as the fair value of
these assets equaled or exceeded their carrying values.

During the fourth quarter of 2015, as a result of our annual impairment test, the Company wrote down

broadcast licenses with a carrying value of $13,282,000 to their fair value of $12,408,000, resulting in a
non-cash impairment charge of $874,000, which is included in net income for the year ended December 31,
2015. 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. Quarterly Results of Operations (Unaudited)
March 31,

June 30,

2017*

2016*

2017

2016*

September 30,
2017

2016*

December 31,

2017

2016*

(In thousands, except per share data)

Net operating revenue . . . . . . . . . . . $26,155 $27,464 $30,261 $30,866 $30,269 $29,878 $ 31,464 $30,747
22,042
Station operating expenses
. . . . . . . .
2,915
Corporate G&A . . . . . . . . . . . . . . .
37
Other operating expense (income), net. .
Impairment of intangible assets
—
. . . . .
Operating income from continuing

21,140
2,717
(3)
—

21,340
2,863
(21)
—

21,775
2,728
(1,393)
—

21,755
3,132
(127)
—

21,426
2,880
79
—

21,842
2,620
8
—

23,238
2,782
124
1,449

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

1,973

3,610

5,876

6,396

5,509

6,768

3,871

5,753

Other (income) expenses:

Interest expense . . . . . . . . . . . . .

208

179

229

182

254

187

212

196

Income from continuing operations

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

Income (loss) from discontinued

1,765
718

3,431
1,418

5,647
2,272

6,214
2,569

5,255
2,290

6.581
2,678

3,659
(11,200)

5,557
2,208

1,047

2,013

3,375

3,645

2,965

3,903

14,859

3,349

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

1,588
Net income . . . . . . . . . . . . . . . . . . $ 1,938 $ 3,024 $ 4,534 $ 4,811 $33,416 $ 5,414 $ 14,829 $ 4,937

30,451

1,166

1,159

1,511

1,011

(30)

891

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

March 31,

June 30,

2017*

2016*

2017

2016*

September 30,
2017

2016*

December 31,

2017

2016*

(In thousands, except per share data)

Basic earnings per share

. . . . . . $ 0.18
From continuing operations
From discontinued operations . . . . .
0.15
Basic earnings per share . . . . . . . . $ 0.33

$ 0.35
0.17
$ 0.52

$ 0.57
0.20
$ 0.77

$ 0.62
0.20
$ 0.82

$ 0.50
5.16
$ 5.66

$ 0.66
0.26
$ 0.92

$ 2.52
(0.01)
$ 2.51

Weighted average common shares . . . .

5,795

5,751

5,803

5,754

5,807

5,755

5,815

$ 0.57
0.27
$ 0.84

5,785

Diluted earnings per share

. . . . . . $ 0.18
From continuing operations
From discontinued operations . . . . .
0.15
Diluted earnings per share . . . . . . . $ 0.33

$ 0.35
0.17
$ 0.52

$ 0.57
0.20
$ 0.77

$ 0.61
0.20
$ 0.81

$ 0.50
5.16
$ 5.66

$ 0.66
0.26
$ 0.92

$ 2.52
(0.01)
$ 2.51

$ 0.57
0.27
$ 0.84

Weighted average common and

common equivalent shares . . . . . . .

5,808

5,759

5,806

5,763

5,807

5,764

5,815

5,797

Certain prior year amounts and March 31, 2017 quarterly data have been reclassiﬁed to conform with
current presentation.

15. Litigation

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

16. Other Income

During the third quarter of 2016, the Company sold a tower in our Norfolk, Virginia market for

approximately $1,619,000 to SBA Towers IX, LLC (‘‘SBA’’). Subsequently, we entered into a ten year lease
for tower space from SBA with three renewal periods of ﬁve years each. The transactions described have been
accounted for as a sale-leaseback transaction. Accordingly, the Company recognized a gain on the sale of
assets of approximately $1,415,000, which is the amount of the gain on sale in excess of present value of
future lease payments and will recognize the remaining approximately $65,000 in proportion to the related
gross rental charged to expense over the term of the lease. The gain is recorded in the other operating
(income) expense, net in the Company’s Consolidated Statements of Income.

During the second quarter of 2015, two transmitters in our Victoria, Texas market were signiﬁcantly

damaged by lightning. The Company’s insurance policy provided coverage for the replacement cost of the
transmitters. The insurance settlement was ﬁnalized during the second quarter and the Company received cash
proceeds of $777,000, resulting in a $417,000 gain. The gain on insurance settlement represents the difference
between the replacement cost and carrying value of the transmitters. The gain is recorded in discontinued
operations, in the Company’s Consolidated Statements of Income.

17. Subsequent Events

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, 2018.

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, 2018.

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/ G. Dean Pearce
G. Dean Pearce

/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

Stockholder Information

TRANSFER AGENT
Computershare, Canton, MA

AUDITORS
UHY LLP, Farmington Hills, MI
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 14, 2018 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,’’ ‘‘guidance’’and other similar expressions are intended to identify forward-looking 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
Chief Operating Offıcer

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

Robert G. Lawrence
Vice President of Programming

Matthew H. Nystrom
Vice President of Digital Media

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
Roy F. Coppedge III*
Founder & Former Managing Director,
BV Investment Partners
Timothy J. Clarke*
Former President and Owner,
Clarke Advertising & Public Relations, Inc.
G. Dean Pearce*
Chief Executive Offıcer
Pearce Development, LLC
* Denotes participation in the Audit and Finance Committee
** Denotes participation the Compensation Committee