Saga Communications, Inc.

2018 Annual Report

2018 Annual Letter

To our fellow shareholders:

I spoke with one of our investors on the phone recently and he asked, “Ed what did you do differently this
year?” I verbally wiggled around for a moment, quickly tried to scan my memory banks for the “ah ha” idea
of the year, and finally had to say, “On the grand scale, not much,” and then I felt a little ashamed.

A week or so later I was attending an event at the Florida Studio Theatre and listened to a speech from
Richard Hopkins, the Producing Executive Director and CEO of the FST. In the decades that Richard has
been at the helm, he has brought the FST from a very small venue, virtually a traveling company, with 108
season subscribers, to a campus of five professional theatres and has built a company with a season subscriber
base of 36,000, which is the third largest in the US.

During his talk, one line jumped out at me. Richard said, “We have continued to focus on incremental
improvements. Get just a little bit better every year, no matter how much money you don’t have, get just a
little bit better every year. Find a way.”

Then I thought, “Well, we do that” and I didn’t feel so bad. Our goal is similar to that of FST, and then I
remembered a great motto of a wonderful Swiss watch company, Vacheron Constantin. It is from a letter
dated July 5, 1819 from its founder Francois Constantin, “Do better if possible, and that is always possible.”

Saga has been doing increments and becoming better for almost 33 years. We started with a few stations in
three markets and now find ourselves with 113 radio stations plus 77 additional local signals that serve our
markets.

The advertising industry is a little tight now but that doesn’t stop us from being better, just a little bit or more,
if possible, each year.

We continue to pay dividends, we continue to be profitable, we continue to have a small amount of debt, with
the possibility of us paying it off and still have a good amount of cash on hand for further expansion plus
money for dividends and running the enterprise.

This is based on several premises. We do know that radio is a talent driven business. It is also an
entertainment driven business. We never lose sight that remaining significant to the communities we serve is
paramount. We, as the voice of the community, must be there in good times and bad times and during
emergencies with reassurance, information and hope. Whether it is bad weather, bad news, or local events, we
want to be the “go to” place to provide information and familiarity.

Unfortunately, in our industry we are seeing less and less of this from other providers. It does, however, work
to our advantage and helps us with a great industry reputation for broadcast excellence.

We do continue to grow, but cautiously and in increments. Last year we were able to finalize the acquisition
of WOGK and WYND, WNDD and WNDN serving Gainesville and Ocala plus The Villages and other areas
in North Central Florida. These are well respected stations with high community regard and a history of
broadcast dominance. They fit Saga very well.

We are still looking for others that provide upside potential and do not pose any risk to the format and the
enterprise.

There is no question that it is getting a little dicey in the economy and we are well fortified.

Let me give you a quick review of last year:

Net Revenue increased 5.7% for the year to $124.8 million. Free cash flow from continuing operations
increased 12.1% to $19.5 million. As of March 18, 2019, our total bank debt was $15 million, and we had
$39.4 million in cash on hand. Including our most recent dividend which was paid on March 29, 2019 we
have paid out over $64 million in dividends since December 3, 2012. Also, during 2018 we repurchased about
$2 million of Saga stock.

Radio holds it own and the industry continues to have a large reach. Our secret sauce is real talent in real
time and a continued emphasis on our interaction with the communities we serve. We must be, and will be,
committed to top of mind awareness for local listeners. Saga people are so aware of this. You have our pledge
for the right goals of service and entertainment and I sincerely thank you for your commitment to Saga
Communications as shareholders and partners. As we do it right, we succeed and swell with pride for our
passion.

Always bear in mind that your own resolution to succeed is more important than any
one thing. Abraham Lincoln (1809-1865)

Sincerely,

Ed Christian
President/Chairman and CEO (for coming on 33 years)

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, 2018
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

NASDAQ

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 every Interactive Data File required to be submitted 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 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 □
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,
2018 on the NYSE American: $191,974,321.

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 4, 2019 was 5,025,256 and 922,918, respectively.

Portions of the Proxy Statement for the 2019 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.
2018 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

1

18

22

22

22

22

23

26

27

38

38

38

39

41

41

41

41

41

41

42

77

i

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 2019 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.

ii

Item 1. Business

PART I

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast
properties. On September 1, 2017 we sold our Joplin, Missouri and Victoria, Texas television stations. 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 4). 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, 2018 and 2017. Unless indicated otherwise, the
information in the Notes to Consolidated Financial Statements relates to our continuing operations. As of
February 28, 2019, we owned seventy-nine FM and thirty-four AM radio stations serving twenty-seven
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, 2019:

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

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
Ocala-Gainesville, FL
Ocala-Gainesville, FL
Ocala-Gainesville, FL
Ocala-Gainesville, FL

(footnotes follow tables)

2018
Market
Ranking
By Radio
Revenue(b)

2018
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
Adults 18 − 34
Contemporary Hits
Men 25 − 49
Rock
Oldies
Adults 45+
Soft Adult Contemporary Women 25 − 54
Hot Adult Contemporary Women 25 − 44
Adults 45 − 64
Classic Hits
Adults 25 − 54
Contemporary Country
Adults 25 − 54
Adult Album Alternative
Adults 25 − 54
Adult Contemporary
Adults 25 − 54
Contemporary Country
Hot Adult Contemporary Women 25 − 44
Urban Hits
Adults 18 − 34
Urban Adult Contemporary Adults 25 − 54
Classic Rock
Alternative Rock
Contemporary Country
Classic Rock
Classic Rock
Classic Rock

Men 35 − 54
Men 18 − 49
Adults 25 − 54
Men 40 − 64
Men 40 − 64
Men 40 − 64

30
30
30
30
34
34
34
34
34
40
40
67
67
67
67
67
67
67
72
72
72
72
86
86
86
86
86
97
97
118
118
118
118

41
41
41
41
36
36
36
36
36
45
45
70
70
70
70
70
70
70
97
97
97
97
78
78
78
78
78
100
100
87
87
87
87

1

Station
WZID
WMLL
WZID-HD2
WZID-HD3
WOXL
WTMT
WTMT-HD2
WTMT-HD3
WOXL-HD2
WOXL-HD3
WSIG
WQPO
WQPO-HD2
WQPD-HD3
WMQR
WWRE
WNAX
WNAX-HD2
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

Market(a)
Manchester, NH
Manchester, NH
Manchester, NH
Manchester, NH
Asheville, NC
Asheville, NC
Asheville, NC
Asheville, NC
Asheville, NC
Asheville, NC
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Harrisonburg, VA
Yankton, SD
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

(footnotes follow tables)

2018
Market
Ranking
By Radio
Revenue(b)
133
133
133
133
153
153
153
153
153
153
168
168
168
168
168
168
182
182
191
191
191
191
248
248
248
248
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

2018
Market
Ranking
By Radio
Market(b)
201
201
201
201
157
157
157
157
157
157
253
253
253
253
253
253
260
260
209
209
209
209
224
224
224
224
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

Target
Demographics
Station Format
Women 25 − 54
Adult Contemporary
Adults 45 − 64
Classic Hits
Adults 18 − 34
Contemporary Hits
Adults 45 − 64
Classic Country
Women 25 − 54
Adult Contemporary
Men 40 − 64
Classic Rock
Adults 45 − 64
Classic Hits
Adults 45 − 64
Country Legends
Adults 25 − 54
Adult Album Alternative
Adults 45+
Oldies
Adults 35 − 64
Classic Country
Women 18 − 34
Contemporary Hits
Adults 45+
Oldies
Male 40 − 64
Classic Rock
Female 25 − 44
Adult Contemporary
Adults 45 − 64
Classic Hits
Adults 25 − 54
Contemporary Country
Adults 45 − 64
Country Legends
Men 40 − 64
Classic Rock
Women 25 − 54
Adult Contemporary
Adults 25 − 54
Adult Album Alternative
Adults 25 − 54
Contemporary Country
Adults 45 − 64
Classic Hits
Adult Contemporary
Women 35 − 64
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
Adults 40 − 64
Classic Hits
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

Contemporary Country

Adults 25 − 54

N/A

Rock

Men 18 − 49

N/A

Classic Hits

Adults 40 − 64

2

Station
WCVQ-HD2

WCVQ-HD3

WHAI
WPVQ
WIII
WQNY
WQNY-HD3
WYXL
WYXL-HD2
WYXL-HD3
WFIZ
WFIZ-HD2
KEGI
KDXY
KJBX
KJBX-HD2
KDXY-HD2
KDXY-HD3
WKNE
WKNE-HD2
WKNE-HD3
WSNI
WSNI-HD2
WINQ
WINQ-HD2
KMIT
KMIT-HD2
KMIT-HD3
KUQL
WRSI
WLZX-HD2
WLZX-HD3
KICD
KMRR
KMRR-HD2
KMRR-HD3
WYMG
WDBR
WQQL
WLFZ
WDBR-HD2
WDBR-HD3
AM:
WJYI
WJOI

Market(a)

Clarksville, TN −
Hopkinsville, KY
Clarksville, TN −
Hopkinsville, KY
Greenfield, MA
Greenfield, MA
Ithaca, NY
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
Keene, NH
Keene, NH
Mitchell, SD
Mitchell, SD
Mitchell, SD
Mitchell, SD
Northampton, MA
Northampton, MA
Northampton, MA
Spencer, IA
Spencer, IA
Spencer, IA
Spencer, IA
Springfield, IL
Springfield, IL
Springfield, IL
Springfield, IL
Springfield, IL
Springfield, IL

Milwaukee, WI
Norfolk, VA

(footnotes follow tables)

2018
Market
Ranking
By Radio
Revenue(b)
N/A

2018
Market
Ranking
By Radio
Market(b)
N/A

Station Format

Contemporary Christian

Target
Demographics
Adults 25 − 54

N/A

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
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
40

N/A

Country Legends

Adults 45 − 64

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

Adult Contemporary
Contemporary Country
Iconic Rock
Contemporary Country
Alternative
Adult Contemporary
Adult Album Alternative
Sports
Contemporary Hits
Oldies/Classic Hits
Classic Rock
Contemporary Country
Adult Contemporary
Country Legends
Contemporary Hits
Sports ESPN
Hot Adult Contemporary Women 25 − 54
Adults 25 − 54
Adult Album Alternative
Adults 45 − 64
Classic Country
Women 25 − 44
Adult Contemporary
Adults 25 − 54
Adult Album Alternative
Adults 25 − 54
Contemporary Country
Adults 45 − 64
Classic Country
Adults 25 − 54
Contemporary 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 45+
Oldies
Adults 25 − 54
Contemporary Country
Women 25 − 54
Adult Contemporary
Adults 45+
Oldies
Female 35 − 64
Soft Adult Contemporary
Men 25 − 54
Classic Rock
Adults 18 − 34
Contemporary Hits
Adults 45 − 64
Classic Hits/Oldies
Adults 25 − 54
Contemporary Country
Adults 45 − 64
Country Legends
Adults 45+
Oldies

Christian
Adult Standards

Adults 25 − 54
Adults 45 − 64

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

41
45

3

2018
Market
Ranking
By Radio
Revenue(b)
67
67
72
72
72
72
86
97
133
153
153
168
168
180
191
191
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

2018
Market
Ranking
By Radio
Market(b)
70
70
97
97
97
97
78
100
201
157
157
253
253
260
209
209
N/A
N/A
N/A
N/A
N/A
N/A

Station Format

Sports
Christian
News/Talk
Talk/Sports
Soft Adult Contemporary
News/Talk
Gospel
News/Talk
News/Talk
Sports/Talk
Sports/Talk
News/Talk
Sports ESPN
News/Talk
News/Talk
Sports Talk
News/Talk
Sports/Talk
Classic Hits
News/Talk
Country Legends
Classic Hits

Target
Demographics

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

Sports/Talk ESPN

Men 18 − 64

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

News/Talk
Classic Country
Oldies
News/Talk
News/Talk
Sports Talk
News/Talk
News/Talk
News/Talk

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

Market(a)
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
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
Greenfield, MA
Ithaca, NY
Ithaca, NY
Keene, NH
Keene, NH
Northampton, MA
Spencer, IA
Springfield, IL

Station
KRNT
KPSZ
WGAN
WZAN
WBAE
WGIN
WSPO
WHNP
WFEA
WISE
WYSE
WSVA
WHBG
WNAX
WINA
WVAX
KGMI
KPUG
KBAI
WKVT
WBCO
WRND

WKFN

WHMQ
WPVQ
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 2018 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.

4

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 $116,386,000 or 87% of our gross revenue for the year ended December 31, 2018
(approximately $124,809,000 or 87% in fiscal 2017 and approximately $131,233,000 or 85% in fiscal 2016)
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.

5

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
2018 was approximately $18,110,000 or 13% of our gross revenue (approximately $18,151,000 or 13% in
fiscal 2017 and approximately $23,545,000 or 15% in fiscal 2016 which includes $5,183,000 in national
political sales or 3%).

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 stations (and prior to their sale, our 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, 2018, we had approximately 687 full-time employees and 344 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’’).

6

Federal Regulation of Radio Broadcasting

Introduction. The ownership, operation and sale of radio 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 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.
Radio station licenses generally expire along with the licenses of all other radio stations in a given state. The
FCC accepts renewal applications for various groups of radio stations every two months, beginning in
June 2019, when we must file applications for renewal of license of our radio stations in Virginia. 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.

7

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
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

(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
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

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
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

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
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

8

Station
KJBX
WKNE
WSNI
WINQ
WZID
WMLL
WKLH
WHQG
WNRG
WJMR
KMIT
KUQL
WNOR
WAFX
WOGK
WYND
WNDD
WNDN
WRSI
WPOR
WCLZ
WMGX
WYNZ
KICD
KMRR
WLZX
WAQY
WYMG
WLFZ
WDBR
WQQL
WNAX

AM:
WISE
WYSE
KGMI
KPUG
KBAI
WINQ
WBCO
WSPO
WINA
WVAX
WQEZ
WKFN
KRNT
KPSZ
WHMQ
WPVQ
WSVA
WHBG

Market(1)

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
Ocala, FL
Ocala, FL
Ocala, FL
Ocala, FL
Northampton, MA
Portland, ME
Portland, ME
Portland, ME
Portland, ME
Spencer, IA
Spencer, IA
Springfield, MA
Springfield, MA
Springfield, IL
Springfield, IL
Springfield, IL
Springfield, IL
Yankton, SD

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

Expiration Date of
FCC Authorization

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

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
Greenfield, MA
Harrisonburg, VA
Harrisonburg, VA

5,000
December 1, 2019
5,000(3) December 1, 2019
February 1, 2022
5,000
February 1, 2022
10,000
February 1, 2022
1,000
April 1, 2022
1,000

500(3) October 1, 2020

December 1, 2019
5,000
October 1, 2019
5,000
October 1, 2019
1,000
1,000(3) August 1, 2020
4,000(3) August 1, 2020
February 1, 2021
5,000
February 1, 2021
10,000
1,000
April 1, 2022
2,500(3) April 1, 2022
5,000
October 1, 2019
1,000(3) October 1, 2019

(footnotes follow tables)

9

Station
WHCU
WNYY
WKBK
WZBK
WFEA
WJYI
WJOI
WHMP
WGAN
WZAN
WBAE
WGIN
KICD
WLZX
WTAX
WNAX

Market(1)

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)
5,000
5,000
5,000
1,000
5,000
1,000
1,000
1,000
5,000
5,000
1,000
1,000
1,000
2,500(3)
1,000
5,000

Expiration Date of
FCC Authorization

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

(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.
WHBG, WYSE, WISE, KPSZ, KPUG, KGMI, KBAI, WZBK, WBCO, WQEZ, WKFN, WPVQ(AM),
WNYY, WHCU, WINQ(AM), WSVA and WLZX(AM) operate with lower power at night than the power
shown.

(3) 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 (Section 310(b)), 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. We serve as a holding company for our various radio station subsidiaries (where we
could not have more than 25% of our stock owned or voted by Aliens).

The FCC has 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 revised 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

10

(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 revised 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 revised 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 revised 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 revised 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.

We are permitted to own an unlimited number of radio stations on a nationwide basis (subject to the

local ownership restrictions described below).

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.

Under the Communications Act, and the FCC’s ‘‘Local Ownership Rule,’’ 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 November 2017, the FCC ended its 2010/2014 Quadrennial Review proceeding wherein (effective

February 7,2018) it (1) eliminated the newspaper/broadcast cross-ownership rule (which prohibited the
common ownership of a daily print newspaper and a full-power broadcast station (AM, FM or TV) if the
station’s service contour encompassed the newspaper’s community of publication); (2) eliminated the radio/
television cross-ownership rule (which prohibited an entity from owning two or more television stations and
one radio station in the same market, unless the market met certain size criteria); (3) revised the ‘‘Local
Television Ownership Rule’’ to eliminate the so called — ‘‘Eight-Voices Test’’ and to modify the ‘‘Top-Four
Prohibition’’ to better reflect the competitive conditions in local markets; (4) declined to modify the market
definitions relied on in the ‘‘Local Radio Ownership Rule’’ (discussed above), but provided a presumption for
certain embedded markets (smaller markets, as defined by Nielsen Audio, that are included in a larger parent
market) transactions; (5) eliminated the attribution rule for television joint sales agreements; and (6) retained
the disclosure requirement for shared service agreements involving commercial television stations. The FCC
also adopted a Notice of Proposed Rule Making (‘‘NPRM’’) to seek comment on an ‘‘incubator’’ program to
promote ownership diversity. In December 2018, the FCC adopted an NPRM to initiate the 2018 Quadrennial
Review of its media ownership rules. The three rules subject to review are the Local Radio Ownership Rule,
the Local Television Ownership Rule, and the dual network rule (which permits a television station to affiliate

11

with an entity maintaining two or more broadcast television networks unless the two or more networks consist
of two or more of the major networks (i.e., ABC, CBS, NBC and Fox) or one of these four networks and
either the UPN or WB television network.) The FCC is seeking comment on whether, given the current state
of the media marketplace, the FCC should retain, modify, or eliminate any of these rules. The Company
cannot predict what, if any action, the FCC may take as a result of its review.

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. 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. Due to changes in local radio markets, the ownership of some of our radio stations, in the
future, could exceed the current ownership limits imposed by the Local Ownership Rule. Their current
ownership structure is ‘‘grandfathered’’ by the FCC. Absent a waiver, it might not be possible to sell all of
them as currently configured in ‘‘clusters’’ to a single purchaser. 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, one 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, the FCC ‘‘suspended’’ the elimination of
this exemption until the FCC resolved issues concerning cable television ownership.

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

12

the FCC. As an owner of such towers, our subsidiaries are subject to the registration requirements. The FCC’s
rules require cable operators, direct satellite TV providers, broadcast radio licensees, and satellite radio
licensees to post public inspection files to the FCC’s online database rather than maintaining them in a local
public inspection file. The Company’s radio stations post their public inspection files to the FCC’s website.
Posting these files to the FCC’s online database renders the materials more widely accessible to the public.
The FCC has warned licensees of possible enforcement action if these files are found not to be in compliance
at the time of license renewal.

The Company is required to pay (1) FCC filing fees in connection with its applications and an (2) annual

regulatory fee determined by the number and character of the radio stations the Company owns as of
October 1 of each prior year.

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

broadcasters prohibit discrimination by broadcasters and multichannel video programming distributors. 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 (which the FCC has proposed to eliminate), 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 previously entered into what have

commonly been referred to as Time Brokerage Agreements (‘‘TBAs’’) which are sometimes termed Local
Marketing Agreements.’’ 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 Company currently has no TBAs.

13

Other FCC Requirements.

Low Power FM Radio. There exists 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 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. As required by the Local Community Radio Act of 2010, the FCC in 2012 modified its rules
to maintain 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
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.

In-Band On-Channel ‘‘Hybrid Digital’’ Radio. The FCC’s rules permit 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 (which streams do not count as separate radio stations
under the multiple ownership rules.) At the present time, we are configured to broadcast in HD radio on
53 stations.

14

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
AM and 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 2015 Report and Order, 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. To implement this policy, the FCC opened ‘‘filing windows,’’
the last one closing October 31, 2016. Some of the Company’s subsidiaries that are AM licensees, acquired
FM translators and during the filing window, and relocated them to their local markets to pair with some of
the Company’s AM broadcast stations. The FM translators so acquired must rebroadcast the related AM
station for at least four years, not counting any periods of silence. The FCC later opened two windows for the
filing of applications for construction permits for new FM translators, the final window closing January 31,
2018. 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 licensee’s AM signal to provide
fill-in and/or nighttime service on a permanent basis. The Company filed applications in both windows and
obtained some construction permits as a result. If the Company should decide that a subsidiary should sell or
suspend operations of an AM station with such an FM construction permit or license, the subsidiary would
also be required to sell or suspend operations of the FM translator. In May 2018, the FCC adopted an NPRM
proposing to streamline the rules relating to interference caused by FM translators and expedite the translator
interference complaint resolution process. The proposals, if implemented, could limit or avoid protracted and
contentious interference resolution disputes, provide translator licensees both additional flexibility to remediate
interference and additional investment certainty, and allow expedited resolution of interference claims by
affected stations. The rule changes proposed in the NPRM, among other things, would require more definite
information in listener complaints and that listener complaints beyond a certain contour would not be
actionable.

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 threshholds 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. The FCC has adopted rules that give Native
American tribes a priority to obtain broadcast radio licenses in tribal communities. The rules provide an
opportunity for tribes to establish new service specifically designed to offer programming that meets the needs
of tribal citizens. In addition, the rules 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) Require 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) Give FCC operating bureaus authority to cap filing window applications. In 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 October 2018, the FCC released a ‘‘Second Further Notice of Proposed Rulemaking’’ as part of its ongoing
effort to assist AM broadcast stations in providing full-time service to their communities. The FCC is seeking
comment on technical proposals to reduce nighttime interference afforded to wide-area ‘‘Class A’’ AM radio

15

stations to enable more local AM stations to increase their nighttime service. The Company has no Class A
AM radio stations, but has Class B, Class C and Class D AM radio stations, some of which might benefit if
the FCC’s changes its rules as proposed.

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. Another organization, Global Music Rights, has begun
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. 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. In late 2018,
Congress passed the ‘‘Music Modernization Act’’ which was signed into law by the President. The law
(1) improves compensation to songwriters and streamlining how their music is licensed; (2) enables legacy
artists (who recorded music before 1972) to be paid royalties when their music is played on digital radio; and
(3) provides a consistent legal process for studio professionals, including record producers and engineers to
receive royalties for their contributions to music that they help to create. The law creates a blanket license for
digital music providers to make permanent downloads, limited downloads, and interactive streams, creates a
collective to administer the blanket license, and makes various improvements to royalty rate proceedings. This
new law could impose an additional financial burden on the Company, but the extent of the burden would
depend on how the fee payment requirement was structured.

On January 3, 2013, the FCC released the Sixth Further Notice of Proposed Rulemaking, which 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.

16

Executive Officers

Our current executive officers are:

Name

Edward K. Christian
Samuel D. Bush
Marcia K. Lobaito

Catherine A. Bobinski

Christopher S. Forgy

Age

74
61
70

59

58

Position

President, Chief Executive Officer and Chairman; Director
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
Senior Vice President of Operations

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. 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.

Mr. Forgy has been Senior Vice President of Operations since May 2018. He was President/General
Manager of our Columbus, Ohio market from 2010 to 2018 and was Director of Sales of our Columbus, Ohio
market from 1995 to 2006. He has been with Saga for 20 years.

17

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, 2018 our long-term debt, including a current portion of $5,000,000, was approximately

$20,000,000. 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 June 27, 2023. 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, 2025, and certain other key personnel, including on-air personalities, we

18

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 five markets when combined represented 41%, 41%, and 43% of our net operating

revenue for the years ended December 31, 2018, 2017 and 2016, 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 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. Such
acquisitions could be delayed by shutdowns of the U.S. Government. 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

19

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, 2018, our FCC broadcasting licenses represented 38.3% 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.

20

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.

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

As of March 2, 2019, Edward K. Christian, our President, Chief Executive Officer and Chairman, holds

approximately 65% 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
12 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.

21

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, 2018, the studios and offices of 25 of our 28 operating locations, including our

corporate headquarters in Michigan, are located in facilities we own. The remaining studios and offices are
located in leased facilities with lease terms that expire in 3.5 years to 6 years. We own or lease our transmitter
and antenna sites, with lease terms that expire in 2 months to 71 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.

22

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 NASDAQ Global Market of the NASDAQ Stock

Market LLC 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 NASDAQ for the calendar quarters indicated (prices for periods prior to the four-for-three
stock split are adjusted for such split):

Year
2017:

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

2018:

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

High

Low

$51.40
$51.95
$46.80
$46.60

$42.60
$40.10
$39.00
$37.89

$47.55
$45.45
$37.75
$40.35

$36.10
$36.50
$35.00
$30.05

The closing price for the Company’s Class A Common Stock on March 4, 2019 as reported by the

NASDAQ was $33.91. As of March 4, 2019, there were approximately 165 holders of record of the
Company’s Class A Common Stock, and one holder of the Company’s Class B Common Stock.

Dividends

During 2018, the Company’s Board of Directors declared four quarterly cash dividends and a special
cash dividend totaling $1.45 per share on its Classes A and B shares. These dividends totaling approximately
$8.6 million were accrued or paid during 2018. See Note 1 of the financial statements for specific details on
the 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 accrued or 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.

23

Securities Authorized for Issuance Under Equity Compensation Plan Information

The following table sets forth as of December 31, 2018, 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

(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation
Plans (Excluding
Column (a))

Plan Category
Equity Compensation Plans Approved by

Stockholders:
Employees’ 401(k) Savings and

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

—

109,176(1)

$ —
$0.00(2)

520,665
396,719

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

Total

—
109,176

—
917,384

(1) All 109,176 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, 2018. Shares repurchased during the quarter were from the retention of shares for the
payment of withholding taxes related to the vesting of restricted stock and from the purchase of shares under
our Stock Buy-Back Program.

Period
October 1 − October 31, 2018 . . . . . .
November 1 − November 30, 2018 . . .
December 1 − December 31, 2018 . . .
. . . . . . . . . . . . . . . . . . . . . . .
Total

Total Number
of Shares
Purchased
—
17,888
1,223
19,111

Average Price
Paid per Share
$ —
$37.280
$31.405
$36.904

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Program
—
—
1,223
1,223

Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the
Program(a)
$21,111,964
$20,445,099
$20,406,691
$20,406,691

(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.

24

Performance Graph

COMMON STOCK PERFORMANCE

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

December 31, 2014, 2015, 2016, 2017 and 2018 of our Class A Common Stock against the cumulative total
return of our New Index the NASDAQ Stock Market (US Companies) and a New Peer Group selected by us
consisting of the following radio broadcast companies: Beasley Broadcast Group, Inc., Cumulus Media Inc.,
Emmis Communications Corp., Entercom Communications Corp., Entravision Communications Corp., iHeart
Communications, Inc., 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 Old Index was the NYSE American Stock Market (US Companies). The change to the New Index
was a result of us listing on the NASDAQ instead of the NYSE American Stock Market in 2018. The Old
Peer Group consisted 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 change to the New Peer Group in 2018
provides a more comparable and similarly aligned Peer Group going forward given mergers and acquisitions
in the industry as well as the sale of our television stations during 2017. The graph and table assume that
$100 was invested on December 31, 2013, in each of our Class A Common Stock, the NASDAQ 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

A
L
L
O
D

200

150

100

50

0

Saga Communications Inc.
NYSE MKT Stock Market
(US Companies)
NASDAQ Stock Market
(US  Companies)
New Peer Group
Old Peer Group

143.37

104.15
93.84
90.15
79.58

2013

2014

2015

2016

2017

2018

Legend

Symbol

Total Return For:

(cid:4) Saga Communications Inc.
(cid:5) NYSE MKT Stock Market (US Companies)
▲ CRSP Nasdaq Stock Market US
◆ New Peer Group
◆ Old Peer Group

12/14

12/15

12/16

12/17

12/13
12/18
100.00 90.36 82.16 110.74 93.14 79.58
100.00 105.09 81.73 91.90 101.08 93.84
100.00 115.31 124.20 136.36 145.76 143.37
100.00 98.02 104.65 107.33 115.18 104.15
100.00 93.27 91.40 104.38 105.68 90.15

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.

25

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

2018

Years Ended December 31,
2017(2)(3)
2015(2)(5)
2016(2)(4)
(In thousands except per share amounts)

2014(2)(6)(7)

$124,829
93,727
11,359
61
—

$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

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

$ 19,682
946
$

$ 17,229
903
$

$ 22,527
744
$

$ 17,130
855
$

$ 18,833
$ 1,032

Net Income:

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

$ 13,690
—
$ 13,690

$ 22,246
32,471
$ 54,717

$ 12,910
5,276
$ 18,186

$ 9,146
4,268
$ 13,414

$ 10,676
4,228
$ 14,904

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

$

$

$

$

2.30
—
2.30
5,829

2.30
—
2.30

$

$

$

$

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

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

5,829

5,807

5,771

5,740

5,753

Cash Dividends Declared Per Common

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

$

1.45

2.00

1.30

1.10

1.80

2018(1)

2017(2)(3)

December 31,
2016(2)(4)
(In thousands)

2015(2)(5)

2014(2)(6)(7)

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

$ 45,430
$ 59,103
$120,779
$248,477
$ 20,000
$184,999

$ 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

(1) Reflects the assets and liabilities of WOGK-FM, WNDT-FM, WNDD-FM, and WNDN-FM acquired on

December 31, 2018.

(2) On September 1, 2017, the Company sold the Joplin, Missouri and Victoria, Texas television stations.

The historical results of operations for the television stations are presented in the discontinued operations
for all periods presented.

26

(3) 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.

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

acquired in February 2016.

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

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.
(7) Reflects the results of WFIZ-FM, acquired in January 2014.

(6)

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 September 1, 2017 the Company sold its Joplin, Missouri and Victoria, Texas television stations. The

historical results of operations for the television stations are presented in the discontinued operations for all
periods presented (see Note 4). As a result of the Company’s television stations being reported as discontinued
operations the Company only has one reportable segment at December 31, 2018 and 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.

27

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, 2018, 2017 and 2016, approximately 87%, 88% and 86%, 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 2018 and 2016 due to the increased number of national, state, and local
elections in most of our markets as compared to 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.

28

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.

During the years ended December 31, 2018, 2017 and 2016, our Columbus, Ohio; Des Moines, Iowa;

Manchester, New Hampshire; Milwaukee, Wisconsin and Norfolk, Virginia markets, when combined,
represented approximately 41%, 41%, and 43%, 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,
2017

2016

2018

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

11%
7%
5%
12%
6%

11%
7%
5%
12%
6%

12%
8%
6%
12%
5%

During the years ended December 31, 2018, 2017 and 2016, the radio stations in our five largest markets

when combined, represented approximately 48%, 48% and 49%, 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,
2017

2016

2018

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

16%
6%
6%
14%
6%

15%
7%
6%
14%
6%

15%
7%
9%
14%
4%

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

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

Discontinued Operations — Television Stations

We sold our television stations on September 1, 2017. All historical results of operations for the

television stations are reported in the discontinued operations for all periods presented.

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

29

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 did not vary significantly from year to year. Any change in our
revenue, with the exception of those instances where stations were 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 endeavored 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 year ended December 31, 2016
approximately 83%, and 77% 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.

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 2017.

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.

30

Results of Operations

The following tables summarize our results of operations for the three years ended December 31, 2018,

2017 and 2016.

Consolidated Results of Operations

2018 vs. 2017

2017 vs. 2016(1)

$ Increase
(Decrease)

(806)
960
677
1,406
1,449

(5,298)
159
—
—

% Increase
(Decrease)

(0.7)%
1.1%
6.2%

N/M
N/M

(23.5)%
21.4%
—
—

Net operating revenue . . . . . . . . . . . . . $124,829 $118,149 $118,955
86,799
Station operating expense . . . . . . . . . . .
10,980
Corporate G&A . . . . . . . . . . . . . . . . .
(1,351)
. . .
Other operating expense (income), net
Impairment of intangible assets
—
. . . . . . .
Operating income from continuing

87,759
11,657
55
1,449

93,727
11,359
61
—

Years Ended December 31,
2017

2018

2016

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s and per share information)
5.7% $
$ 6,680
6.8%
5,968
(2.6)%
(298)
N/M
6
N/M
(1,449)

operations . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . .
Interest (income)
. . . . . . . . . . . . . . . .
Other (income) expense . . . . . . . . . . . .
Income from continuing operations before

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

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

Income from discontinued operations, net

19,682
946
(631)
(23)

17,229
903
—
—

19,390
5,700

16,326
(5,920)

22,527
744
—
—

21,783
8,873

2,453
43
(631)
(23)

14.2%
4.8%

N/M
N/M

3,064
11,620

18.8%
N/M

(5,457)
(14,793)

(25.1)%
N/M

13,690

22,246

12,910

(8,556)

(38.5)%

9,336

N/M

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

5,276
Net income . . . . . . . . . . . . . . . . . . . . $ 13,690 $ 54,717 $ 18,186

— 32,471

(32,471)
$(41,027)

N/M
N/M

27,195
$ 36,531

N/M
N/M

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

. . . . . . . .

2.30 $
—
2.30 $

3.77 $
5.50
9.27 $

2.19
0.90
3.09

$

$

(1.47)
(5.50)
(6.97)

(39.0)% $
N/M
N/M

$

1.58
4.60
6.18

72.2%
N/M
N/M

Results of Discontinued Operations

2018 vs. 2017

2017 vs. 2016

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

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

Years Ended December 31,
2017(1)

2018

2016

% Increase
(Decrease)

$ Increase
(Decrease)
(In thousands, except %’s and per share information)
$(14,238)
(9,757)
(31)

$23,636
14,743
(42)

N/M
N/M
N/M

$ (9,398)
(4,986)
73

$ Increase
(Decrease)

$ — $14,238
9,757
31

—
—

4,450
21
—

8,935
32
—

(4,450)
(21)
—

N/M
N/M
—

(4,485)
(11)
—

% Increase
(Decrease)

(39.8)%
(33.8)%
N/M

(50.2)%
(34.4)%
—

4,429

8,903

(4,429)

N/M

(4,474)

(50.3)%

50,842

— (50,842)

N/M

50,842

N/M

—
—
—

—

—

—
—

55,271
22,800
$ — $32,471

8,903
3,627
$ 5,276

(55,271)
(22,800)
$(32,471)

N/M
N/M
N/M

46,368
19,173
$27,195

N/M
N/M
N/M

(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

31

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

For the year ended December 31, 2018, consolidated net operating revenue was $124,829,000 compared

with $118,949,000 for the year ended December 31, 2017, an increase of $6,680,000 or 5.7%. We had an
increase of approximately $5,440,000 that was attributable to stations that we did not own or operate for the
entire comparable period, and an increase of $1,240,000 generated by stations we owned or operated for the
comparable period in 2017 (‘‘same station’’). The increase in same station revenue was primarily the result
of increases in gross national revenue of $1,321,000, gross political revenue of $1,279,000, and gross
non-spot revenue of $458,000 from 2017 partially offset by a decrease in gross local revenue of $1,811,000.
The increase in gross national revenue is due to increases in our Champaign, Illinois; Manchester,
New Hampshire; Milwaukee, Wisconsin and Norfolk, Virginia 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 increase in gross
non-spot revenue is due to increases in our Ithaca, New York and Yankton, South Dakota markets. The
decrease in gross local revenue was due to decreases in our Champaign, Illinois; Des Moines, Iowa;
Harrisonburg, Virginia; Jonesboro, Arkansas; Northampton, Massachusetts and Springfield, Massachusetts
markets.

Station operating expense was $93,727,000 for the year ended December 31, 2018, compared with
$87,759,000 for the year ended December 31, 2017, an increase of $5,968,000 or 6.8%. We had an increase
of approximately $5,326,000 that was attributable to stations that we did not own or operate for the entire
comparable period, and an increase of approximately $642,000 generated by stations we owned or operated
for the comparable period in 2017. The increase is primarily attributable to an increase in healthcare costs of
$365,000 and an increase in music licensing fees of $283,000 related to a credit we received in the third
quarter of 2017 resulting from SESAC arbitration.

Operating income for the year ended December 31, 2018 was $19,682,000 compared to $17,229,000 for

the year ended December 31, 2017, an increase of $2,453,000 or 14.2%. The increase was a result of the
increase in net operating revenue partially offset by the increase in station operating expense, described above,
a decrease in our corporate general and administrative expenses of $298,000 or 2.6%, an increase in other
operating expense of $6,000 from 2017 and an impairment charge of $1,449,000 in 2017. The decrease in
corporate expenses is due to a decrease in key man life insurance of $220,000, and a decrease of $100,000 in
compensation costs.

Income from continuing operations, net of tax for the year ended December 31, 2018 was $13,690,000

compared to $22,246,000 for the year ended December 31, 2017, a decrease of $8,556,000 or 38.5%. The
decrease in income from continuing operations, net of tax is primarily due to the income tax benefit of
approximately $11.5 million in 2017 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 increase in operating income in
2018, described above, an increase in interest expense of $43,000 due to an increase in our interest rates, an
increase in interest income of $631,000 and an increase in other income of $23,000. See Note 7 of the
financial statements for more information on the impact of the Tax Cuts and Jobs Act. The increase in interest
income is attributable to an increase in interest and dividend income earned on cash and cash equivalents. The
increase in other income is due to insurance proceeds resulting from damage to the roof of our building in our
Bellingham, Washington market.

We generated net income of $13,690,000 ($2.30 per share on a fully diluted basis) during the year ended

December 31, 2018, compared to $54,717,000 ($9.27 per share on a fully diluted basis) for the year ended
December 31, 2017, a decrease of $41,027,000. This is a direct result of the decrease in income from
continuing operations, net of tax of $8,556,000 and a decrease in income from discontinued operations, net of
tax of $32,471,000 due to the sale of the television stations in September 2017 and the related gain recognized
on the sale.

32

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 7 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.

33

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 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. On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility,
dated August 18, 2015, and amended on September 1, 2017, extending the revolving credit maturity date
under the Credit Agreement for five years after the date of the amendment to June 27, 2023.

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.

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. As a result of the Second Amendment, the Company incurred an additional
$120,000 of transaction fees related to the Credit Facility that were capitalized. The cumulative transaction
fees are being amortized over the remaining life of the Credit Facility.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR
(2.4375% at December 31, 2018), 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, 2018) 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 $80 million of unused borrowing capacity under the Revolving Credit Facility at

December 31, 2018.

On February 4, 2019, the Company used $5,000,000 from funds generated by operations to voluntarily

pay down a portion of its Revolving Credit Facility and it is presented in current portion of long-term debt in
our balance sheet at December 31, 2018.

On September 4, 2018, the Company used $5,000,000 from funds generated by operations to pay down a

portion of its Revolving Credit Facility.

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, 2018, 2017 and 2016, we had net cash flows from operating
activities from continuing operations of $25,559,000, $23,912,000 and $21,828,000, 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

34

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, 2018, we have repurchased 2.1 million shares of our Class A
Common Stock for $55.3 million. During the year ended December 31, 2018, approximately 36,000 shares
were repurchased for $1.3 million under our stock buy-back program and 18,000 shares were retained for
payment of withholding taxes for $667,000 related to the vesting of restricted stock.

Our capital expenditures, exclusive of acquisitions, for the year ended December 31, 2018 were
$5,922,000 ($6,246,000 in 2017) for continuing operations and $0 and $335,000 for the years ended
December 31, 2018 and 2017, respectively, for discontinued operations. We anticipate capital expenditures in
2019 to be approximately $5.0 million to $5.5 million, which we expect to finance through funds generated
from operations.

On February 28, 2018, 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 March 30, 2018 to shareholders of record on March 12, 2018 and funded by cash on the
Company’s balance sheet.

On May 15, 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, was paid on
June 22, 2018 to shareholders of record on May 31, 2018 and funded by cash on the Company’s balance
sheet.

On August 14, 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 was paid on
September 14, 2018 to shareholders of record on August 31, 2018 and funded by cash on the Company’s
balance sheet.

On November 28, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.30

per share and a special cash dividend of $0.25 per share on its Classes A and B shares. This dividend totaling
approximately $3.3 million was paid on January 4, 2019 to shareholders of record on December 10, 2018 and
funded by cash on the Company’s balance sheet.

On February 26, 2019, 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 29, 2019 to shareholders of record on March 12, 2019.

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 10). 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 5).

35

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.

On October 29, 2018, the Company entered into an agreement to purchase WOGK-FM, WNDT-FM,
WNDD-FM and WNDN-FM, from Ocala Broadcasting Corporation. The Company closed this transaction
effective December 31, 2018 using funds generated from operations of $9.84 million, which included the
purchase price of $9.3 million, the purchase of $566 thousand in accounts receivable by certain closing
adjustments and transactional costs of approximately $25 thousand, of which $552 thousand was paid in
January 2019.

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, 2018:

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 . . . . . . .

$20,000
3,232
7,963
29,535
—
$60,730

$ 5,000
729
1,562
14,597
—
$21,888

1 to 3 Years
(In thousands)
$ —
1,437
2,604
9,886
—
$13,927

4 to 5 Years

More Than
5 Years

$15,000
1,066
1,774
3,555
—
$21,395

$ —
—
2,023
1,497
—
$3,520

(1) Under our Credit Facility, the maturity on outstanding debt of $20 million could be accelerated if we do
not maintain certain covenants. (See Note 5 of the Notes to Consolidated Financial Statements). We
voluntarily paid down $5 million in debt in February 2019.
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 $19,920,000 in obligations under employment agreements and contracts with on-air
personalities, other employees, and our President, CEO, and Chairman, Edward K. Christian.

(3)

(2)

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.

36

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 606, Revenue from Contracts with Customers.

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, 2018, from
3.9% to 4.9% or from $759,000 to $948,000 would result in a decrease in net income of $139,000, net of
taxes for the year ended December 31, 2018.

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, 2018, we have recorded approximately
$95,250,000 in broadcast licenses and $18,839,000 in goodwill, which represents 45.9% 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.

There was no impairment of broadcast licenses in 2018.

During the fourth quarter of 2017, we recognized a $1,449,000 impairment charge for broadcast licenses

primarily due to a decline in available market revenue, market revenue share, profit margins and estimated
long-term growth rates in our Springfield, Illinois market. There were no impairment indicators for goodwill.
Please refer to Note 3 — 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.

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

37

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, 2018, the Company would have recorded an additional broadcast license
impairment of approximately $1.3 million; had the fair values of each of our broadcasting licenses been lower
by 20% as of December 31, 2018, the Company would have recorded an additional broadcast license
impairment of approximately $4.8 million; and had the fair value of our broadcasting licenses been lower by
30% as of December 31, 2018, the Company would have recorded an additional broadcast license impairment
of approximately $9.6 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. We had no stock options outstanding at December 31, 2018 or
2017.

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 2018 than they did during 2018, our interest
expense would increase, and income before taxes would decrease by $234,000. 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.

38

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, 2018 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, 2018. Our internal control over financial reporting as of December 31, 2018 has
been audited by UHY LLP, an independent registered public accounting firm, as stated in its report which
appears below.

39

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, 2018, 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, 2018, 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,
2018 and 2017, and the related consolidated statements of income, stockholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2018 and the related notes and financial statement
schedule, and our report dated March 15, 2019 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 15, 2019

40

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to the information contained in our
Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed not later than 120 days after the end
of the Company’s fiscal year. See also Item 1. Business — Executive Officers.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to the information contained in our
Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed not later than 120 days after the end
of the Company’s fiscal year.

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 2019 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

The information required by this item is incorporated by reference to the information contained in our
Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed not later than 120 days after the end
of the Company’s fiscal year.

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated by reference to the information contained in our
Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed not later than 120 days after the end
of the Company’s fiscal year.

41

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

43

Consolidated Financial Statements:

— Consolidated Balance Sheets as of December 31, 2018 and 2017 . . . . . . . . . . . . . . .

— Consolidated Statements of Income for the years ended December 31, 2018, 2017

and 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

— Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017
and 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44

45

46

47

48

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.

42

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, 2018 and 2017, and the related consolidated statements of income,
stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, 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, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2018, 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, 2018,
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 15, 2019
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 15, 2019

43

Saga Communications, Inc.

Consolidated Balance Sheets
(In thousands, except par value)

December 31,

2018

2017

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance of $759 ($727 in 2017) . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . .
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets
Net property and equipment

$ 44,729
19,984
2,556
1,326
68,595
59,103

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

Other assets:

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

amortization of $13,682 ($12,588 in 2017) . . . . . . . . . . . . . . . . . . . . . .

95,250
18,839

93,259
15,558

6,690
$248,477

7,543
$248,769

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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

$ 2,613

$

2,206

Accrued expenses:

Payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Barter transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies

Stockholders’ equity:

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

Common stock:

Class A common stock, $.01 par value, 35,000 shares authorized, 6,732

issued (6,694 in 2017)

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

Class B common stock, $.01 par value, 3,500 shares authorized, 923

issued and outstanding (898 in 2017)

. . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock (1,703 shares in 2018 and 1,656 in 2017, at cost) . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,899
3,274
3,072
1,307
5,000
23,165
23,732
15,000
1,581
63,478
—

—

67

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

—

67

9
64,795
156,689
(36,561)
184,999
$248,477

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

See accompanying notes.

44

Saga Communications, Inc.

Consolidated Statements of Income

2018

Years Ended December 31,
2017
(In thousands, except per share data)
$118,149

2016

$118,955

$124,829

93,727
11,359
61
—
105,147
19,682

946
(631)
(23)
19,390

3,040
2,660
5,700
13,690
—
$ 13,690

$

$

$

$

$

2.30
—
2.30
5,829

2.30
—
2.30

5,829

1.45

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

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .

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

See accompanying notes.

45

Balance at January 1, 2016 . . . . .
Net income . . . . . . . . . . . . . . .
Conversion of shares from Class B
to Class A . . . . . . . . . . . . . .
Issuance of restricted stock . . . . .
Dividends declared per common

share . . . . . . . . . . . . . . . . .

Compensation expense related to

restricted stock awards
Purchase of shares held in

. . . . . .

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

. . . . . .

treasury . . . . . . . . . . . . . . . .
401(k) plan contribution . . . . . . .
Balance at December 31, 2017 . . .
Net income . . . . . . . . . . . . . . .
Conversion of shares from Class B
to Class A . . . . . . . . . . . . . .
Issuance of restricted stock . . . . .
Forfeiture of restricted stock . . . .
Dividends declared per common

share . . . . . . . . . . . . . . . . .

Compensation expense related to

restricted stock awards
Purchase of shares held in

. . . . . .

12
23

—

—

—
—
6,638

17
19
(1)

21

—

—

—
—
6,694

12
27
(1)

—

—

treasury . . . . . . . . . . . . . . . .
401(k) plan contribution . . . . . . .
Balance at December 31, 2018 . . .

—
—
6,732

Saga Communications, Inc.

Consolidated Statements of Stockholders’ Equity
Years ended December 31, 2018, 2017 and 2016

Class A
Common Stock
Shares Amount

Class B
Common Stock
Shares Amount

6,603

$66

865

$ 8

Additional
Paid-In
Capital
(In thousands)
$57,510

Retained
Earnings

Treasury
Stock

Total
Stockholders’
Equity

$ 98,180
18,186

$(32,948)

$122,816
18,186

—
—

—

—

—
—
$66

—
—
—

1

—

—

—
—
$67

—
—
—

—

—

—
—
$67

(12)
25

—

—

—
—
878

(17)
29
—

8

—

—

—
—
898

(12)
37
—

—

—

—
—
923

—
—

—

—

—
—
$ 8

—
1
—

—

—

—

—
—
$ 9

—
—
—

—

—

—
—
$ 9

—
—

—

—
—

(7,633)

2,101

—

—
—

—

—

—
—

(7,633)

2,101

—
(54)
$59,557

—
—
$108,733
54,717

(746)
312
$(33,382)

(746)
258
$134,982
54,717

—
(1)
—

826

—
—
—

—

— (11,842)

2,279

—

—
—
—

(826)

—

—

—
14
$62,675

—
—
$151,608
13,690

(946)
260
$(34,894)

—
—
—

—

—
—
—

(8,609)

2,201

—

—
—
—

—

—

—
—
—

1

(11,842)

2,279

(946)
274
$179,465
13,690

—
—
—

(8,609)

2,201

—
(81)
$64,795

— (2,000)
333
—
$(36,561)
$156,689

(2,000)
252
$184,999

See accompanying notes.

46

Saga Communications, Inc.

Consolidated Statements of Cash Flows

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13,690

$ 54,717

$ 18,186

2018

Years Ended December 31,
2017
(In thousands)

2016

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 . . . . .
Loss (gain) on sale of assets . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) on insurance claim . . . . . . . . . . . . . . . . . . . . . . . . .
Barter revenue, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred and other compensation . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities:

Increase in receivables and prepaid expenses . . . . . . . . . . .
Increase in accounts payable, accrued expenses, and other

liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 (used in) received from investing activities . . . . . . . . . . .

—
(14,876)

69,193
37,505

Cash flows from financing activities:

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

(5,000)
(11,864)
(120)
(2,000)
(18,984)
(8,301)
53,030
$ 44,729

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

See accompanying notes.

47

—
6,786
2,660
—
51
2,201
61
(23)
107
62

(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

(157)

(434)

(885)

121
11,869
25,559
—
25,559

(5,922)
318
(9,289)
17
(14,876)

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

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

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

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, 2018, we owned or operated seventy-nine
FM and thirty-three AM radio stations, serving twenty-seven markets throughout the United States. On
September 1, 2017 the Company sold its Joplin, Missouri and Victoria, Texas television stations. The
historical results of operations for the television stations are presented in the discontinued operations for all
periods presented (see Note 4). As a result of the Company’s television stations being reported as discontinued
operations the Company only has one reportable segment at December 31, 2018 and 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 five markets when combined represented 41%, 41% and 43% of our net operating revenue for

the years ended December 31, 2018, 2017 and 2016, 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, 2018 and 2017.

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, 2018.

48

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,
2018, 2017 and 2016 was as follows:

Year Ended

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

December 31, 2018 . . . . . . . . . . .
December 31, 2017 . . . . . . . . . . .
December 31, 2016 . . . . . . . . . . .

$727
$518
$614

$444
$333
$195

Barter Transactions

Allowance
From
Acquisitions
(in thousands)
$ 25
$181
$ —

Write Off of
Uncollectible
Accounts,
Net of
Recoveries

$(437)
$(305)
$(291)

Balance at
End of
Period

$759
$727
$518

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 2018, 2017 and 2016.

Property and equipment consisted of the following:

Estimated
Useful Life

December 31,

2018

2017

(In thousands)

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

— $ 14,402
35,812
25,959
53,752
6,740
3,555
140,220
(81,117)
$ 59,103

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

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

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

49

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies − (continued)

Depreciation expense for continuing operations for the years ended December 31, 2018, 2017 and 2016
was $5,692,000, $5,391,000 and $5,234,000, respectively. Depreciation expense for discontinued operations
for the years ended December 31, 2018, 2017 and 2016 was $0, $445,000 and $1,387,000, respectively.

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 112 broadcast licenses serving 27 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. As a result of the Second Amendment, the Company incurred an additional $120,000 of transaction
fees related to the Credit Facility that were capitalized. The cumulative transaction fees are being amortized
over the remaining life of the Credit Facility. During the years ended December 31, 2018, 2017 and 2016, we
recognized interest expense related to the amortization of debt issuance costs of $51,000, $53,000 and
$53,000, respectively.

At December 31, 2018 and 2017 the net book value of debt issuance costs related to our line of credit

was $207,000, and $138,000, 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, 2018, we had remaining
authorization of $20.4 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 2018, 2017 and 2016, we acquired 53,713 shares at an average price of $37.24
per share, 37,141 shares at an average price of $47.72 per share and 18,612 shares at an average price of
$40.06 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 606,
Revenue from Contracts with Customers.

50

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies − (continued)

Local Marketing Agreements

We have entered into Time Brokerage Agreements (‘‘TBAs’’) or Local Marketing Agreements (‘‘LMAs’’)
in certain markets. In a typical TBA/LMA, the FCC licensee of a station makes available, for a fee, blocks of
air time on its station to another party that supplies programming to be broadcast during that air time and sells
its own commercial advertising announcements during the time periods specified. Revenue and expenses
related to TBAs/LMAs are included in the accompanying Consolidated Statements of Income. Assets and
liabilities related to the TBAs/LMAs 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 $2,438,000, $2,441,000 and $2,633,000 for the years ended December 31, 2018, 2017
and 2016, respectively. Advertising and promotion costs related to our discontinued operations amounted to
$0, $240,000 and $341,000 for the years ended December 31, 2018, 2017 and 2016, respectively.

Income Taxes

The provision for income taxes is calculated using the asset and liability method, under which 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. In assessing the realizability of deferred tax assets, we
consider whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The realization of deferred tax assets is primarily dependent upon the generation of future taxable
income. 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 November 28, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.30

per share and a special cash dividend of $0.25 per share on its Classes A and B shares. This dividend totaling
approximately $3.3 million was paid on January 4, 2019 to shareholders of record on December 10, 2018 and
funded by cash on the Company’s balance sheet.

On August 14, 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 was paid on
September 14, 2018 to shareholders of record on August 31, 2018 and funded by cash on the Company’s
balance sheet.

On May 15, 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, was paid on
June 22, 2018 to shareholders of record on May 31, 2018 and funded by cash on the Company’s balance
sheet.

On February 28, 2018, 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 March 30, 2018 to shareholders of record on March 12, 2018 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 and
funded by cash on the Company’s balance sheet.

51

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies − (continued)

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 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 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 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 and funded by
cash on the Company’s balance sheet.

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 and funded by cash on the Company’s balance sheet.

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 and funded by cash on the Company’s balance sheet.

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 and funded by cash on the Company’s balance sheet.

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 8 — 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.

52

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,
2018
2017
(In thousands, except per share data)

2016

Numerator:

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

$13,690
256

$22,246
370

$12,910
231

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

$13,434

$21,876

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

$ — $32,471
541

—

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

$ — $31,930

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

$13,434

$53,806

$12,679

$ 5,276
94

$ 5,182

$17,861

Denominator:

Denominator for basic earnings per share-weighted average

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

5,829

5,803

5,761

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

—

4

10

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

5,829

5,807

5,771

Basic earnings per share:

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

$

2.30
—
$ 2.30

Diluted earnings per share

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

$

$

2.30
—
2.30

$

$

$

$

3.77
5.50
9.27

3.77
5.50
9.27

$

$

$

$

2.20
0.90
3.10

2.19
0.90
3.09

There were no stock options outstanding that had an antidilutive effect on our earnings per share
calculation for the years ended December 31, 2018, 2017, and 2016, 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 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
amendment and all updates, which established Accounting Standards Codification (‘‘ASC’’) Topic 606 (the
‘‘new revenue standard’’) were adopted on January 1, 2018. The Company adopted the new revenue standard
using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are

53

Saga Communications, Inc.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies − (continued)

presented under the new revenue standard, while prior period amounts are not adjusted and continue to be
reported in accordance with our historic accounting under Topic 605. Impacts of the new revenue standard do
not have a material impact 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 was adopted on January 1, 2018 and did not have a material
impact on our consolidated financial statements.

Recent Accounting Pronouncements — Not Yet Adopted

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 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. In 2018, the FASB issued several updates
to address certain practical expedients, codification improvements, and targeted improvements to the original
guidance. Upon adoption, we expect to recognize a right-of-use asset and a lease liability approximately
$7 million to reflect the present value of remaining lease payments under the existing leasing arrangements.
While the recognition of such lease assets and liabilities will impact our consolidated balance sheet, we do not
expect a material impact on our consolidated statements of income or cash flows. We have elected to apply
the modified retrospective transition approach without restatement of comparative periods financial
information, as permitted by the transition guidance.

2. Revenue

Adoption of the new revenue standard

We adopted the new revenue standard on January 1, 2018, using the modified retrospective method with

no impact on our financial statements. The cumulative effect of initially adopting the new guidance had no
impact on the opening balance of retained earnings as of January 1, 2018. There was no material impact on
the condensed consolidated balance sheets as of December 31, 2018, or on the condensed consolidated
statement of income for the year ended December 31, 2018. Results for reporting periods beginning after
January 1, 2018 are presented under the new revenue standard, while prior periods amounts are not adjusted
and continue to be reported in accordance with our historic accounting under Topic 605.

54

Saga Communications, Inc.

Notes to Consolidated Financial Statements

2. Revenue − (continued)

Disaggregation of Revenue

The following table presents revenues disaggregated by revenue source:

2018

Twelve Months Ended
December 31,
2017
(in thousands)

2016

Types of Revenue
Broadcast Advertising Revenue, net
. . . . . . . . . . . . .
Digital Advertising Revenue . . . . . . . . . . . . . . . . . . .
Other Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$114,929
3,900
6,000
$124,829

$109,175
3,610
5,364
$118,149

$110,053
3,567
5,335
$118,955

Nature of goods and services

The following is a description of principal activities from which we generate our revenue:

Broadcast Advertising Revenue

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

revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising;
therefore, revenue is recognized at a point in time when each advertising spot is transmitted. Agency
commissions are calculated based on a stated percentage applied to gross billing revenue for our advertising
inventory placed by agency and are reported as a reduction of advertising revenue.

Digital Advertising Revenue

We recognize revenue from our digital initiatives across multiple platforms such as targeted digital

advertising, online promotions, advertising on our websites, mobile messaging, email marketing and other
e-commerce. Revenue is recorded when each specific performance obligation in the digital advertising
campaign takes place, typically within a one month period.

Other Revenue

Other revenue includes revenue from concerts, promotional events, tower rent and other miscellaneous
items. Revenue is generally recognized when the event is completed, as the promotional events are completed
or as each performance obligation is satisfied.

Contract Liabilities

Payment is generally due within 30 days although certain advertisers are required to pay in advance.

When a customer pays for the services in advance of the performance obligations and therefore these
prepayments are recorded as contract liabilities. Typical contract liabilities relate to prepayments for
advertising spots not yet run; prepayments from sponsors for events that have not yet been held; and gift cards
sold on our websites used to finance a broadcast advertising campaign. Generally all contract liabilities are
expected to be recognized within one year and are included in Accounts payable in the Company’s
Consolidated Financial Statements and are immaterial.

Transaction Price Allocated to the Remaining Performance Obligations

As the majority of our contracts are one year or less, we have utilized the optional exemption under

ASC 606-10-50-14 and will not disclose information about the remaining performance obligations for
contracts which have original expected durations of one year or less.

55

Saga Communications, Inc.

Notes to Consolidated Financial Statements

3. 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.

Broadcast Licenses

We have recorded the changes to broadcast licenses for the years ended December 31, 2018 and 2017 as

follows:

Balance at January 1, 2017 . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2017 . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
Balance at December 31, 2018 . . . . . . . . . . . . . . . . .

2018 Impairment Test

Continuing
Operations

$86,622
8,086
—
(1,449)
$93,259
1,991
$95,250

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

Total

$96,229
8,086
(9,607)
(1,449)
$93,259
1,991
$95,250

We completed our annual impairment test of broadcast licenses during the fourth quarter of 2018 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.

The following table reflects certain key estimates and assumptions used in the impairment test in the
fourth quarter of 2018, 2017 and 2016. The ranges for operating profit margin and market long-term revenue
growth rates vary by market. In general, when comparing between 2018, 2017 and 2016: (1) the market

56

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

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 3.9% lower than previously projected for 2018.

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

Fourth
Quarter 2018
12.0% − 12.0%
19.0% − 36.4%
0.5% − 2.9%

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%

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.

2017 Impairment Test

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.

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.

Goodwill

During the fourth quarter of 2018, 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, 2018 and 2017 as

follows:

Balance at January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total
(in thousands)
$ 7,407
8,151
$15,558
3,281
$18,839

57

Saga Communications, Inc.

Notes to Consolidated Financial Statements

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

Other Intangible Assets

We have recorded amortizable intangible assets at December 31, 2018 as follows:

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

Gross
Carrying
Amount

$ 3,861
5,965
4,660
1,943
$16,429

Accumulated
Amortization
(In thousands)
$ 3,861
5,504
2,634
1,683
$13,682

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

Net
Amount

$ —
461
2,026
260
$2,747

Net
Amount

$ —
497
2,017
204
$2,718

Aggregate amortization expense for these intangible assets for the years ended December 31, 2018, 2017

and 2016, was $1,094,000, $860,000 and $642,000, respectively. Our estimated annual amortization expense
for the years ending December 31, 2019, 2020, 2021, 2022 and 2023 is $1,029,000, $813,000, $387,000,
$39,000 and $35,000, respectively.

4. 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 10). 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 5).

58

Saga Communications, Inc.

Notes to Consolidated Financial Statements

4. Discontinued Operations − (continued)

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)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . .
Pretax gain on the disposal of discontinued operations
. . . .
Total pretax gain on discontinued operations . . . . . . . . . . .
Income tax expense(3)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . .

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

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

2018
$ —
—
—
—
—
—
—
—
—
$ —

(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) The effective tax rates on pretax income from discontinued operations were approximately 41%.
(4) Results of operations for the Television stations are reflected through August 31, 2017. The effective date

of the sale was September 1, 2017.

59

Saga Communications, Inc.

Notes to Consolidated Financial Statements

4. 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,
2018

December 31,
2017

December 31,
2016

Cash paid during the period

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

$ —
—

$

21
23,260

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
—

$

32
2,677

$1,387
628
32
43
(42)
—

$ 894
(59)
—
—

(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.

5. Long-Term Debt

Long-term debt consisted of the following:

Credit Facility:

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

December 31,
2018

December 31,
2017

(In thousands)

$20,000
(5,000)
$15,000

$25,000
—
$25,000

60

Saga Communications, Inc.

Notes to Consolidated Financial Statements

5. Long-Term Debt − (continued)

Future maturities of long-term debt are as follows:

Year Ending December 31,

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
(In thousands)
$ 5,000
—
—
—
15,000
—
$20,000

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. On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility,
dated August 18, 2015, and amended on September 1, 2017, extending the revolving credit maturity date
under the Credit Agreement for five years after the date of the amendment to June 27, 2023.

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.

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. As a result of the Second Amendment, the Company incurred an additional
$120,000 of transaction fees related to the Credit Facility that were capitalized. The cumulative transaction
fees are being amortized over the remaining life of the Credit Facility.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR
(2.4375% at December 31, 2018), 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. Letters 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

December 31, 2018) 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 $80 million of unused borrowing capacity under the Revolving Credit Facility at

December 31, 2018.

On February 4, 2019, the Company used $5,000,000 from funds generated by operations to voluntarily

pay down a portion of its Revolving Credit Facility and it is presented in current portion of long-term debt in
our balance sheet at December 31, 2018.

61

Saga Communications, Inc.

Notes to Consolidated Financial Statements

5. Long-Term Debt − (continued)

On September 4, 2018, the Company used $5,000,000 from funds generated by operations to pay down a

portion of its Revolving Credit Facility.

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.

6. Supplemental Cash Flow Information

2018

Years Ended December 31,
2017
(In thousands)

2016

Cash paid during the period for:

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

$ 884
$2,864

Non-cash transactions:

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

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

$3,570
$3,677

$ —
$
11
$ 252

$ 850
$2,420

$3,618
$3,367

$ 826
$
8
$ 274

$ 636
$6,555

$3,471
$3,217

$ —
$
49
$ 258

7. Income Taxes

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 for 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.

As a result of our initial analysis of the impact of the Tax Act, we recorded a provisional amount of net

tax benefit of $11.5 million in 2017 related to the remeasurement of our deferred tax balance and other effects.
We completed our accounting for the income tax effects of the Tax Act in 2018, and no material adjustments
were required to the provisional amounts initially recorded.

62

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Income Taxes − (continued)

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,

2018

2017

(In thousands)

Deferred tax liabilities:

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

$ 5,145
19,324
350
24,819

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

118
906
63
1,087
—
1,087
$ 23,732
$
303
(24,035)
$(23,732)

$ 4,333
17,640
317
22,290

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

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, 2018 and December 31,
2017, we do not have a valuation allowance for net deferred tax assets.

At December 31, 2018 and 2017, net deferred tax liabilities include a deferred tax asset of $1,087,000
and $1,175,000, 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:

2018

Years Ended December 31,
2017
(In thousands)

2016

Current:

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

$2,205
835
3,040
2,660
$5,700

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

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

In addition, we recognized a tax expense (benefit) of $0, ($100,000), and $0 as a result of stock option
exercises for the difference between compensation expense for financial statement and income tax purposes for
the years ended December 31, 2018, 2017 and 2016, respectively.

63

Saga Communications, Inc.

Notes to Consolidated Financial Statements

7. Income Taxes − (continued)

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 . . . . . . .

2018

$4,017
1,134
549
—
$5,700

Years Ended December 31,
2017
(In thousands)
$ 5,716
(769)
633
(11,500)
$ (5,920)

2016

$7,665
926
282
—
$8,873

The 2018 and 2016 effective tax rates exceed the federal statutory rate primarily due to state income
taxes. 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 2017’s earnings.

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 2015. 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, 2018, and 2017 there were no accrued balances recorded related to uncertain tax

positions.

We classify income tax-related interest and penalties that are related to income tax liabilities as a

component of income tax expense. For the years ended December 31, 2018, 2017 and 2016, we had $31,000,
$0, and $0, respectively, tax-related interest and penalties and had $0 accrued at December 31, 2018 and
2017.

8. 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, which was amended in 2018 after approval of the
amendment by our stockholders at our 2018 annual meeting (as amended, 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 made in 2013 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 2018 amendment to the Second Restated 2005 Plan (i) extended the date for making
awards to September 6, 2023 and (ii) increased the number of authorized shares under the Plan by
90,000 shares of Class B Common Stock. 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.

64

Saga Communications, Inc.

Notes to Consolidated Financial Statements

8. Stock-Based Compensation − (continued)

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

not exceed 370,000 shares of Class B Common Stock, 990,000 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 370,000
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 vested and expensed at December 31, 2012, therefore there was no
compensation expense related to stock options for the years ended December 31, 2018, 2017 and 2016. 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, 2016 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2016 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2017 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2018 . . . . . . . . . . .
Vested and Exercisable at December 31, 2018 . . .

Weighted
Average
Exercise
Price
$28.47
—
—
—
$28.47
—
28.47
—
$ —
—
—
—
$ —
$ —

Weighted
Average
Remaining
Contractual
Term (Years)
1.4

Aggregate
Intrinsic
Value
$289,769

0.4

$633,834

—

—
—

$

$
$

—

—
—

Number of
Options
29,035
—
—
—
29,035
—
(29,035)
—
—
—
—
—
—
—

65

Saga Communications, Inc.

Notes to Consolidated Financial Statements

8. Stock-Based Compensation − (continued)

The total intrinsic value of stock options exercised during the years ended December 31, 2018, 2017 and

2016 was $0, $664,321, and $0, respectively. Cash received from stock options exercised during the years
ended December 31, 2018, 2017 and 2016 was $0, $354 and $0, respectively.

There were no options granted during 2018, 2017 and 2016 and there were no stock options outstanding

as of December 31, 2018.

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

Outstanding at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested and outstanding at December 31, 2018 . . . . . . . . . . . . .
Weighted average remaining contractual life (in years) . . . . . . . . . . .

Weighted
Average Grant
Date Fair
Value
$40.28
48.60
41.20
38.83
$43.73
44.20
42.13
46.23
$44.85
37.37
43.98
45.39
$40.87

Shares
106,789
48,471
(51,368)
(630)
103,262
48,780
(54,598)
(805)
96,639
63,811
(49,493)
(1,781)
109,176
2.3

The weighted average grant date fair value of restricted stock that vested during 2018, 2017 and 2016
was $2,385,000, $2,300,000 and $2,116,000, respectively. The net value of unrecognized compensation cost
related to unvested restricted stock awards aggregated $4,166,000, $4,063,000 and $4,223,000 at
December 31, 2018, 2017 and 2016, respectively.

For the years ended December 31, 2018, 2017 and 2016 we had $2,201,000, $2,279,000 and $2,101,000,

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, 2018, 2017 and 2016 was $251,000, $912,000 and
$840,000, respectively.

9. 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
$1,100, $1,700 and $1,200 in 2018, 2017 and 2016, respectively. The Company’s discretionary contribution to
the plan was approximately $265,000, $255,000 and $275,000 for the years ended December 31, 2018, 2017
and 2016, respectively.

66

Saga Communications, Inc.

Notes to Consolidated Financial Statements

9. 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, 2018, 2017 and 2016
was $149,000, $211,000 and $184,000, 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.

10. 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.

2018 Acquisitions

On October 29, 2018, the Company entered into an agreement to purchase WOGK-FM, WNDT-FM,
WNDD-FM and WNDN-FM, from Ocala Broadcasting Corporation, LLC for an aggregate purchase price of
$9.3 million, subject to certain purchase price adjustments. The Company closed this transaction effective
December 31, 2018 using funds generated from operations of $9.84 million, which included the purchase
price of $9.3 million, the purchase of $566 thousand in accounts receivable by certain closing adjustments and
transactional costs of approximately $25 thousand, of which $552 thousand was paid in January 2019.
Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the
Ocala, Florida market as well as synergies and growth opportunities expected through the combination with
the Company’s existing stations.

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.

67

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Acquisitions and Dispositions − (continued)

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.

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.

Condensed Consolidated Balance Sheet of 2018 and 2017 Acquisitions:

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

and liabilities of the 2018 and 2017 acquisitions at their respective acquisition dates.

Condensed Consolidated Balance Sheet of 2018 and 2017 Acquisitions

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

Acquisitions in

2018

2017

(In thousands)

$ 559
3,007

$ 1,390
6,678

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

1,991
3,281
1,123
6,395
9,961

120
120
$9,841

8,086
8,151
2,019
18,256
26,324

468
468
$25,856

68

Saga Communications, Inc.

Notes to Consolidated Financial Statements

10. Acquisitions and Dispositions − (continued)

Pro Forma Results of Operations for Acquisitions (Unaudited)

The following unaudited pro forma results of our operations for the years ended December 31, 2018 and

2017 assume the 2018 and 2017 acquisitions occurred as of January 1, 2017. 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,
2018

2017

(In thousands, except per share data)

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

Diluted earnings per share:

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

$129,228
97,314
11,359
61
—
20,494
946
(631)
(23)
20,202
5,944
14,258
—
$ 14,258

$

$

$

$

2.40
—
2.40

2.40
—
2.40

$128,180
96,218
11,657
55
1,449
18,801
903
—
—
17,898
(5,276)
23,174
32,471
$ 55,645

$

$

$

$

3.93
5.50
9.43

3.93
5.50
9.43

11. Related Party Transactions

Principal Stockholder Employment Agreement

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

President and CEO, which became effective as of June 1, 2011, and replaces and supersedes his prior
employment agreement. We entered into amendments to the agreement on February 12, 2016 (the ‘‘First
Amendment’’) and February 26, 2019 (the ‘‘Second Amendment’’). The First Amendment extended the term
of the employment agreement to March 31, 2021. The First 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

69

Saga Communications, Inc.

Notes to Consolidated Financial Statements

11. Related Party Transactions − (continued)

defined cost of living increase). Mr. Christian may defer any or all of his annual salary. The Second
Amendment extends the term of the employment agreement from March 31, 2021 to March 31, 2025 and also
makes certain clarifying modifications to the employment agreement.

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 First 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, 2018 Mr. Christian’s average
annual compensation, as defined by the employment agreement was approximately $1,898,000.

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 first 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.

On December 13, 2016, Mr. Christian agreed to defer approximately $100,000 of his 2017 salary to
which was paid 100% on January 5, 2018. On December 5, 2017, Mr. Christian agreed to defer approximately
$100,000 of his 2018 salary which was paid 100% on January 4, 2019. On December 14, 2018, Mr. Christian
agreed to defer approximately $100,000 of his 2019 salary to be paid 100% on January 3, 2020.

Change in Control Agreements

In December 2007, Samuel D. Bush, Senior Vice President and Chief Financial 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. In September 2018, Christopher S. Forgy, Senior Vice President of Operations entered
into a Change in Control Agreement. 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.

70

Saga Communications, Inc.

Notes to Consolidated Financial Statements

11. Related Party Transactions − (continued)

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 4) 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, and 2016 we paid
Surtsey Media fees of approximately $3,800 and $3,900 per month, respectively plus accounting 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 and 2016 we paid fees of approximately $5,200, and $5,100 per month,
respectively, plus accounting fees and reimbursement of expenses actually incurred in operating the station.

71

Saga Communications, Inc.

Notes to Consolidated Financial Statements

11. Related Party Transactions − (continued)

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 and $6,000 during the first eight months of the year ended December 31,
2017 prior to the Television Sale and the year ended December 31, 2016, 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, 2018, we have used the hours of service from New
Pointe Systems, and we have approximately 1,000, 30 second spots left to provide to Pearce Development.
During 2018 and 2017, we also paid approximately $4,100 and $3,300 rent per month, respectively to Pearce
Development for our Hilton Head studio and office space beginning September 1, 2017.

12. Common Stock

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

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

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

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

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

to elect twenty-five percent, or two, of our directors. The holders of the Common Stock, voting as a single
class with each share of Class A Common Stock entitled to one vote and each share of Class B Common
Stock entitled to ten votes, are entitled to elect the remaining directors. The Board of Directors consisted of
seven members at December 31, 2018. 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.

72

Saga Communications, Inc.

Notes to Consolidated Financial Statements

12. Common Stock − (continued)

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.

13. 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, 2018 was $1,603,000 ($1,558,000 and $1,519,000
for the years ended December 31, 2017 and 2016, respectively).

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

December 31, 2018 (in thousands):

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,562
1,369
1,235
1,067
707
2,023
$7,963

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.

73

Saga Communications, Inc.

Notes to Consolidated Financial Statements

13. Commitments and Contingencies − (continued)

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.

14. 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,
2018
$44,729
$20,000

December 31,
2017
$53,030
$25,000

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 3 — 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 2018, 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 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.

74

Saga Communications, Inc.

Notes to Consolidated Financial Statements

15. Quarterly Results of Operations (Unaudited)
March 31,

2018

2017*

2018

June 30,

September 30,
2017
2018
(In thousands, except per share data)

2017

December 31,
2017
2018

Net operating revenue
Station operating expenses . . . . . . . . . .
Corporate G&A . . . . . . . . . . . . . . . .
Other operating expense (income), net . . .
Impairment of intangible assets . . . . . . .
Operating income from continuing

. . . . . . . . . . . . $28,009 $26,155 $32,234 $30,261 $31,648 $30,269 $32,938 $ 31,464
23,238
2,782
124
1,449

23,397
2,544
(251)
—

21,340
2,863
(21)
—

21,755
3,132
(127)
—

23,140
2,848
213
—

21,426
2,880
79
—

23,429
2,813
85
—

23,761
3,154
14
—

operations

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

2,319

1,973

6,033

5,876

5,321

5,509

6,009

3,871

Other (income) expenses:

Interest expense . . . . . . . . . . . . . . .
Interest (income)
. . . . . . . . . . . . . .
Other (income) expense . . . . . . . . . .
Income from continuing operations before
. . . . . . . . . . . . . . . .
Income tax provision (benefit)
. . . . . . .
Income from continuing operations, net of
tax . . . . . . . . . . . . . . . . . . . . . . .

income taxes

Income (loss) from discontinued

219
(89)
—

208
—
—

255
(188)
—

229
—
—

243
(167)
(25)

254
—
—

229
(187)
2

212
—
—

2,189
660

1,765
718

5,966
1,795

5,647
2,272

5,270
1,575

5,255
2,290

5,965
1,670

3,659
(11,200)

1,529

1,047

4,171

3,375

3,695

2,965

4,295

14,859

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

(30)
891
Net income . . . . . . . . . . . . . . . . . . . $ 1,529 $ 1,938 $ 4,171 $ 4,534 $ 3,695 $33,416 $ 4,295 $ 14,829

— 30,451

— 1,159

—

—

Basic earnings (loss) per share

From continuing operations . . . . . . . . $ 0.26 $
From discontinued operations
Basic earnings per share

. . . . . . . . . $ 0.26 $

. . . . . .

—

0.18 $
0.15
0.33 $

0.70 $
—
0.70 $

0.57 $
0.20
0.77 $

0.62 $
—
0.62 $

0.50 $
5.16
5.66 $

0.72 $
—
0.72 $

2.52
(0.01)
2.51

Weighted average common shares . . . . .

5,842

5,795

5,834

5,803

5,822

5,807

5,820

5,815

Diluted earnings (loss) per share

From continuing operations . . . . . . . . $ 0.26 $
From discontinued operations
Diluted earnings per share . . . . . . . . $ 0.26 $

. . . . . .

—

0.18 $
0.15
0.33 $

0.70 $
—
0.70 $

0.57 $
0.20
0.77 $

0.62 $
—
0.62 $

0.50 $
5.16
5.66 $

0.72 $
—
0.72 $

2.52
(0.01)
2.51

Weighted average common and common

equivalent shares . . . . . . . . . . . . . .

5,842

5,808

5,834

5,806

5,822

5,807

5,820

5,815

* March 31, 2017 quarterly data have been reclassified to conform with current presentation.

16. Litigation

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.

75

Saga Communications, Inc.

Notes to Consolidated Financial Statements

17. 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.

18. Subsequent Events

On February 26, 2019, 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 29, 2019 to shareholders of record on March 12, 2019.

76

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 15, 2019.

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 15, 2019.

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/ Warren Lada
Warren Lada

/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

Director

Director

Director

Director

Director

77

Exhibit No.
3(a)(3)
3(b)(6)
3(c)(4)
10(a)(1)
10(b)(2)
10(c)(7)
10(d)(9)
10(e)(10)

10(f)(10)

10(g)(8)
10(h)(5)
10(i)(5)
10(j)(5)
10(k)(13)
10(l)(12)

10(m)(11)

10(n)(14)

10(o)(14)

10(p)(15)

10(q)(16)

10(r)(16)

10(s)(17)

10(t)(18)
10(u)(19)

21*
23*
31.1*

31.2*

32*

101.INS*
101.SCH*
101.CAL*

EXHIBIT INDEX

Description

Second Restated Certificate of Incorporation, restated as of December 12, 2003.
Certificate of Amendment to the Second Restated Certificate of Incorporation.
Bylaws, as amended May 23, 2007.
Summary of Executive Insured Medical Reimbursement Plan.
Saga Communications, Inc. 2003 Employee Stock Option Plan.
Chief Executive Officer Annual Incentive Plan.
Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan
Form of Stock Option Agreement under the Second Amended and Restated Saga
Communications, Inc. 2005 Incentive Compensation Plan.
Form of Restricted Stock Option Agreement under the Second Amended and Restated Saga
Communications, Inc. 2005 Incentive Compensation Plan.
Employment Agreement of Edward K. Christian dated as of June 17, 2011.
Change in Control Agreement of Samuel D. Bush dated as of December 28, 2007.
Change in Control Agreement of Warren S. Lada dated as of December 28, 2007.
Change in Control Agreement of Marcia K. Lobaito dated as of December 28, 2007.
Change in Control Agreement of Catherine A. Bobinski dated as of December 28, 2007.
Amendment to Employment Agreement of Edward K. Christian dated as of February 12,
2016.
Credit Agreement dated August 18, 2015 entered into between the Company and JPMorgan
Chase Bank, N.A., The Huntington National Bank and Citizens Bank.
Asset Purchase Agreement by and among Saga Broadcasting, LLC, Saga Quad States
Communications, LLC, Saga Communications, Inc. and Evening Telegram Company d/b/a
Morgan Murphy Media, dated May 9, 2017.
Asset Purchase Agreement by and among Apex Media Corporation, Pearce Development, LLC
f/k/a Apex Real Property, LLC, Saga Quad States Communications, LLC and G. Dean Pearce,
dated May 9, 2017.
Amendment to the Second Amendment and Restated Saga Communications, Inc. 2005
Incentive Compensation Plan as of April 16, 2018.
First Amendment to Credit Agreement dated September 1, 2017 entered into between the
Company and JPMorgan Chase Bank, N.A., The Huntington National Bank and Citizens
Bank.
Letter of Employment for Christopher S. Forgy, Senior Vice President/Operations effective
May 28, 2018.
Second Amendment to Credit Agreement dated June 27, 2018 entered into between the
Company and JPMorgan Chase Bank, N.A., The Huntington National Bank and Citizens
Bank.
Change in Control Agreement of Christopher Forgy dated as of September 28, 2018.
Amendment to Employment Agreement of Edward K. Christian dated as of February 26,
2019.
Subsidiaries.
Consent of UHY LLP.
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 and Rule 13-14(b) of the Securities Exchange Act of 1934, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Calculation Linkbase Document

78

Exhibit No.

101.DEF*
101.LAB*
101.PRE*

XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document

Description

Filed herewith.

*
(1) Exhibit filed with Company’s Form 10-K for the year ended December 31, 1998 and incorporated by

reference herein.

(2) Exhibit filed with the Company’s Registration Statement on From 8-A (File No. 333-107686) filed on

August 5, 2003 and incorporated by reference herein.

(3) Exhibit filed with the Company’s Registration Statement on Form 8-A (File No. 001-11588) filed on

January 6, 2004 and incorporated by reference herein.

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

reference herein.

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

herein.

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

herein.

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

incorporated by reference herein.

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

reference herein.

(9) Exhibit filed as Appendix A to the Company’s Consent Solicitation (File No. 001-11588) filed on

September 17, 2013 and incorporated by reference herein.

(10) Exhibit filed with the Company’s Form 8-K filed on October 16, 2013 and incorporated by reference

herein.

(11) Exhibit filed with the Company’s Form 8-K filed on August 18, 2015 and incorporated by reference

herein.

(12) Exhibit filed with the Company’s Form 8-K filed on February 17, 2016 and incorporated by reference

herein.

(13) Exhibit filed with the Company’s Form 10-K for the year ended December 31, 2015 and incorporated by

reference herein.

(14) Exhibit filed with the Company’s Form 8-K filed on May 10, 2017 and incorporated by reference herein.
(15) Exhibit filed as Appendix A to the Corporation’s Definitive Proxy Statement (File No. 001-11588) filed

on April 16, 2018 and incorporated by reference herein.

(16) Exhibit filed with the Company’s Form 10-Q for the quarter ended June 30, 2018 and incorporated by

reference herein.

(17) Exhibit filed with the Company’s Form 8-K filed on June 27, 2018 and incorporated by reference herein.
(18) Exhibit filed with the Company’s Form 8-K filed on September 28, 2018 and incorporated by reference

herein.

(19) Exhibit filed with the Company’s Form 8-K filed on March 1, 2019 and incorporated by reference herein.

79

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 13, 2019 at 10:00 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

Christopher S. Forgy
Senior Vice President of Operations

Samuel D. Bush
Senior Vice President, Treasurer
and Chief Financial Offıcer

Marcia K. Lobaito
Senior Vice President, Corporate Secretary and
Director of Business Affairs

Catherine A. Bobinski
Senior Vice President − Finance, Chief Accounting
Offıcer and Corporate Controller

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
Warren S. Lada
Former Chief Operating Offıcer
Saga Communications, Inc.
* Denotes participation in the Audit and Finance Committee
** Denotes participation the Compensation Committee