Saga Communications, Inc. Reports 2nd Quarter 2005 Results

Saga Communications, Inc. Reports 2nd Quarter 2005 Results

GROSSE POINTE FARMS, Mich., Aug. 3 /PRNewswire-FirstCall/ -- Saga Communications, Inc. (NYSE:SGA) today reported that 2nd quarter 2005 net operating revenue increased 6.9% over the comparable period in 2004 to approximately $37.6 million and operating income decreased 6.2% to approximately $8.6 million. Net income decreased approximately $1.8 million to approximately $3.1 million ($.15 per fully diluted share) for the quarter ended June 30, 2005 compared to $4.9 million ($.23 per fully diluted share) for the comparable period in 2004. Net of taxes, approximately $767 thousand of this decrease in net income during the quarter was due to the disposition of a tower made obsolete by our DTV conversion project in Victoria, TX. Increased interest and healthcare expenses, net of taxes, decreased net income by approximately $425 thousand and $355 thousand, respectively, for the quarter. For the same period, station operating expense increased 12.3% to approximately $26.7 million (station operating expense includes depreciation and amortization attributable to the stations). On a same station basis for the quarter, net operating revenue increased 2.4% to approximately $36.0 million, operating income decreased 8.0% to $8.4 million and station operating expense increased 6.4% to $25.2 million.

For the six month period ended June 30, 2005, net operating revenue increased 7.9% over the comparable period in 2004 to approximately $69.4 million, operating income decreased 3.3% to approximately $13.9 million and net income was approximately $5.2 million ($.25 per fully diluted share) compared to $7.4 million ($.35 per fully diluted share) for the comparable period in 2004 primarily attributable to the 2nd quarter expense increases referenced above. For the same period, station operating expense increased 11.8% to approximately $51.4 million (station operating expense includes depreciation and amortization attributable to the stations). On a same station basis for the six months, net operating revenue increased 2.3% to approximately $64.7 million, operating income decreased 5.7% to $13.3 million and station operating expense increased 4.7% to $47.3 million.

Saga has been subjected to increased format competition in the Milwaukee, Columbus, Norfolk and Portland markets. To date, this increased competitive pressure has not materially impacted the Milwaukee or Columbus market's financial performance. The financial results in the Norfolk and Portland markets, however, have been materially impacted due to the increased competition. Net revenue in these markets decreased approximately 15% compared to the 2nd quarter 2004. Combined, operating income for these two markets decreased $837 thousand from the comparable quarter in 2004. We believe that the financial impact on these markets will not be long term as rating data indicates that the impacted stations are beginning to return to previous levels of audience share. Excluding the results for the Norfolk and Portland markets, net revenue and operating income on a historical basis for the quarter increased approximately 11% and 4% respectively.

Capital expenditures in the second quarter of 2005 were approximately $3.5 million of which approximately $2.2 million was routine capital expenditures and $1.3 million resulted from other activities including $1.1 million as a result of acquisitions and our DTV related television projects. Future capital expenditures on DTV related projects are expected to be minimal. Previously, Saga estimated capital expenditures for the year to be approximately $9 million. Currently, we expect capital expenditures for the year to be approximately $10.5 million.

The attached Selected Supplemental Financial Data table discloses "as reported," "same station" and "pro forma" information by segment. The "as reported" amounts reflect our historical financial results and include the results of operations for stations that we did not own for the entire comparable period. The "same station" amounts reflect only the results of operations for stations that we owned for the entire comparable period. The "pro forma" amounts assume the 2005 and 2004 acquisitions and dispositions occurred as of January 1, 2004.

Saga Communications utilizes certain financial measures that are not calculated in accordance with generally accepted accounting principles (GAAP) to assess its financial performance. Such non-GAAP measures include same station financial information and free cash flow. These non-GAAP measures are generally recognized by the broadcasting industry as measures of performance and are used by Saga to assess its financial performance including but not limited to evaluating individual station and market-level performance, evaluating overall operations and as a primary measure for incentive based compensation of executives and other members of management. Saga's management believes these non-GAAP measures are used by analysts who report on the industry and by investors to provide meaningful comparisons between broadcasting groups, as well as an indicator of their market value. These measures are not measures of liquidity or of performance in accordance with GAAP, and should be viewed as a supplement to and not as a substitute for the results of operations presented on a GAAP basis including net operating revenue, operating income, and net income. Reconciliations for all of the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the Selected Financial Data Non-GAAP Disclosures tables.

Saga Communications, Inc. is a broadcasting company whose business is devoted to acquiring, developing and operating broadcast properties. The company owns or operates broadcast properties in 26 markets, including 57 FM and 29 AM radio stations, 3 state radio networks, 2 farm radio networks, 5 television stations and 4 low-power television stations. As previously disclosed, Saga has entered into an agreement to acquire an FM station serving the Asheville, NC radio market. For additional information, contact us at (313) 886-7070 or visit our website at http://www.sagacommunications.com/ .

Saga's second quarter 2005 results conference call will be on Wednesday, August 3 at 2:00 p.m. The dial in number for domestic calls is 800/230-1059. For international callers the number is 612/288-0318. The call can be replayed for 7 days by calling domestically 800/475-6701 or internationally 320/365-3844 and referring to access code 789870. Thereafter, a transcript of the call will be available on our website.

This press release contains certain 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 similar expressions are intended to identify forward-looking statements. Key risks, including risks associated with Saga's ability to effectively integrate the stations it acquires and the impact of federal regulation on Saga's business, 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 national and local economic changes and 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 here.

Saga Communications, Inc.
Selected Consolidated Financial Data
For The Three and Six Month Periods
Ended June 30, 2005 and 2004
(amounts in 000's except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating Results
Net operating revenue $37,554 $35,127 $69,384 $64,300
Station operating expense 26,656 23,733 51,354 45,918
Corporate general and
administrative 2,348 2,279 4,126 4,011
Operating income 8,550 9,115 13,904 14,371
Interest expense 1,806 1,085 3,429 2,180
Other expense, net 1,471 65 1,538 73
Income before income tax 5,273 7,965 8,937 12,118
Income tax expense 2,201 3,104 3,700 4,726
Net income $3,072 $4,861 $5,237 $7,392
Earnings per share:
Basic $0.15 $0.23 $0.26 $0.36
Diluted $0.15 $0.23 $0.25 $0.35
Weighted average common shares 20,388 20,816 20,508 20,813
Weighted average common shares
and common equivalents 20,596 21,285 20,771 21,283

Free Cash Flow
Net Income $3,072 $4,861 $5,237 $7,392
Plus: Depreciation and amortization:
Station 2,138 1,726 4,233 3,393
Corporate 49 50 99 99
Deferred tax provision 1,029 1,274 1,590 1,939
Less: Capital expenditures (3,534) (1,732) (7,801) (4,263)
Free cash flow $2,754 $6,179 $3,358 $8,560

Balance Sheet Data
Working capital $23,673 $18,561
Net fixed assets 73,301 63,718
Net intangible and other assets 205,654 174,421
Total assets 317,868 270,918
Long term debt (including current portion of
$1,061 and $0, respectively) 155,911 121,161
Stockholders' equity 120,223 113,522

Saga Communications, Inc.
Selected Supplemental Financial Data
For the Three Months Ended
June 30, 2005 and 2004
(amounts in 000's except per share data)
(Unaudited)

As-Reported Same Station Pro Forma (1)
Consolidated Three Months Ended Three Months Ended Three Months Ended
June 30, June 30, June 30,
2005 2004 2005 2004 2005 2004

Net operating
revenue $37,554 $35,127 $35,971 $35,127 $38,000 $37,022
Station operating
expense 26,656 23,733 25,241 23,733 27,030 25,401
Corporate general
and administrative 2,348 2,279 2,348 2,279 2,348 2,279
Operating income 8,550 9,115 $8,382 $9,115 8,622 9,342
Interest expense 1,806 1,085 1,894 1,418
Other expense, net 1,471 65 1,466 57
Income tax expense 2,201 3,104 2,196 3,067
Net income $3,072 $4,861 $3,066 $4,800
Earnings per
share:
Basic $0.15 $0.23 $0.15 $0.23
Diluted $0.15 $0.23 $0.15 $0.22

As-Reported Same Station Pro Forma (1)
Radio Segment Three Months Ended Three Months Ended Three Months Ended
June 30, June 30, June 30,
2005 2004 2005 2004 2005 2004

Net operating
revenue $33,605 $31,362 $32,022 $31,362 $34,051 $33,257
Station operating
expense 23,316 20,469 21,901 20,469 23,690 22,137
Operating income $10,289 $10,893 $10,121 $10,893 $10,361 $11,120

As-Reported Same Station Pro Forma (1)
Television Three Months Ended Three Months Ended Three Months Ended
Segment June 30, June 30, June 30,
2005 2004 2005 2004 2005 2004

Net operating
revenue $3,949 $3,765 $3,949 $3,765 $3,949 $3,765
Station operating
expense 3,340 3,264 3,340 3,264 3,340 3,264
Operating income $609 $501 $609 $501 $609 $501

As-Reported Same Station Pro Forma (1)
Three Months Ended Three Months Ended Three Months Ended
Depreciation June 30, June 30, June 30,
and amortization 2005 2004 2005 2004 2005 2004
by segment

Radio Segment $1,716 $1,300 $1,389 $1,300 $1,808 $1,781
Television Segment 422 426 422 426 422 426
Corporate and
Other 49 50 49 50 49 50
$2,187 $1,776 $1,860 $1,776 $2,279 $2,257

(1) Pro Forma results assume all acquisitions and dispositions in 2004 and 2005 occurred as of January 1, 2004.

Saga Communications, Inc.
Selected Supplemental Financial Data
For the Six Months Ended
June 30, 2005 and 2004
(amounts in 000's except per share data)
(Unaudited)

As-Reported Same Station Pro Forma (1)
Consolidated Six Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30,
2005 2004 2005 2004 2005 2004

Net operating
revenue $69,384 $64,300 $64,697 $63,253 $70,397 $68,627
Station operating
expense 51,354 45,918 47,270 45,132 52,311 49,709
Corporate general
and administrative 4,126 4,011 4,126 4,011 4,126 4,011
Operating income $13,904 $14,371 $13,301 $14,110 $13,960 $14,907
Interest expense 3,429 2,180 3,649 2,846
Other expense, net 1,538 73 1,523 56
Income tax expense 3,700 4,726 3,643 4,690
Net income $5,237 $7,392 $5,145 $7,315
Earnings per
share:
Basic $0.26 $0.36 $0.25 $0.35
Diluted $0.25 $0.35 $0.25 $0.34

As-Reported Same Station Pro Forma (1)
Radio Segment Six Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30,
2005 2004 2005 2004 2005 2004

Net operating
revenue $61,977 $57,381 $57,290 $56,334 $62,990 $61,708
Station operating
expense 44,725 39,618 40,641 38,832 45,682 43,409
Operating income $17,252 $17,763 $16,649 $17,502 $17,308 $18,299

As-Reported Same Station Pro Forma (1)
Television Segment Six Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30,
2005 2004 2005 2004 2005 2004

Net operating
revenue $7,407 $6,919 $7,407 $6,919 $7,407 $6,919
Station operating
expense 6,629 6,300 6,629 6,300 6,629 6,300
Operating income $778 $619 $778 $619 $778 $619

As-Reported Same Station Pro Forma (1)
Six Months Ended Six Months Ended Six Months Ended
Depreciation and June 30, June 30, June 30,
amortization 2005 2004 2005 2004 2005 2004
by segment

Radio Segment $3,369 $2,552 $2,672 $2,530 $3,599 $3,530
Television Segment 864 841 864 841 864 841
Corporate and
Other 99 99 99 99 99 99
$4,332 $3,492 $3,635 $3,470 $4,562 $4,470

(1) Pro Forma results assume all acquisitions and dispositions in 2004 and 2005 occurred as of January 1, 2004.

Saga Communications, Inc.
Selected Supplemental Financial Data
Quarterly Proforma Information
As of June 30, 2005
(amounts in 000's except per share data)
(Unaudited)

Pro Forma (1) Pro Forma (1) Pro Forma (1) Pro Forma (1)
Three Months Three Months Three Months Three Months
Consolidated Ended Ended Ended Ended
March 31, June 30, September 30, December 31,
2005 2004 2005 2004 2004 2004

Net operating
revenue $32,397 $31,605 $38,000 $37,022 $36,071 $38,045
Station operating
expense 25,281 24,308 27,030 25,401 25,506 26,526
Corporate general
and
administrative 1,778 1,732 2,348 2,279 1,927 2,405
Operating income 5,338 5,565 8,622 9,342 8,638 9,114
Interest expense 1,755 1,428 1,894 1,418 1,369 1,639
Other (income)
expense, net 57 (1) 1,466 57 202 (259)
Income tax
expense 1,447 1,623 2,196 3,067 2,759 3,539
Net income $2,079 $2,515 $3,066 $4,800 $4,308 $4,195
Earnings per
share:
Basic $0.10 $0.12 $0.15 $0.23 $0.20 $0.20
Diluted $0.10 $0.12 $0.15 $0.22 $0.20 $0.20

Pro Forma (1) Pro Forma (1) Pro Forma (1) Pro Forma (1)
Three Months Three Months Three Months Three Months
Radio Segment Ended Ended Ended Ended
March 31, June 30, September 30, December 31,
2005 2004 2005 2004 2004 2004

Net operating
revenue $28,939 $28,451 $34,051 $33,257 $32,425 $34,157
Station operating
expense 21,992 21,272 23,690 22,137 22,281 23,190
Operating
income $6,947 $7,179 $10,361 $11,120 $10,144 $10,967

Pro Forma (1) Pro Forma (1) Pro Forma (1) Pro Forma (1)
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended
March 31, June 30, September 30, December 31,
Television 2005 2004 2005 2004 2004 2004
Segment

Net operating
revenue $3,458 $3,154 $3,949 $3,765 $3,646 $3,888
Station operating
expense 3,289 3,036 3,340 3,264 3,225 3,336
Operating income $169 $118 $609 $501 $421 $552

Pro Forma (1) Pro Forma (1) Pro Forma (1) Pro Forma (1)
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended
Depreciation and March 31, June 30, September 30, December 31,
amortization 2005 2004 2005 2004 2004 2004
by segment

Radio Segment $1,791 $1,749 $1,808 $1,781 $1,785 $1,837
Television
Segment 442 415 422 426 422 454
Corporate and
Other 50 49 49 50 49 50
$2,283 $2,213 $2,279 $2,257 $2,256 $2,341

(1) Pro Forma results assume all acquisitions and dispositions in 2004 and 2005 occurred as of January 1, 2004.

Saga Communications, Inc.
Selected Financial Data Non-GAAP Disclosures
For the Three Months Ended
June 30, 2005 and 2004
(amounts in 000's except per share data)
(Unaudited)

Reconciliation of As-Reported (historical) information to Same Station
Operating Income

Adjustment
As-Reported For Acquisitions Same Station
Three Months and Dispositions Three Months
Consolidated Ended Not Included in Ended
June 30, Entire Comparable June 30,
2005 Period 2005

Net operating revenue $37,554 ($1,583) $35,971
Station operating
expense 26,656 (1,415) 25,241
Corporate general and
administrative 2,348 - 2,348
Operating income $8,550 ($168) $8,382

Adjustment
As-Reported For Acquisitions Same Station
Three Months and Dispositions Three Months
Radio Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2005 Period 2005

Net operating revenue $33,605 ($1,583) $32,022
Station operating
expense 23,316 (1,415) 21,901
Operating income $10,289 ($168) $10,121

Adjustment
As-Reported For Acquisitions Same Station
Three Months and Dispositions Three Months
Television Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2005 Period 2005

Net operating revenue $3,949 - $3,949
Station operating
expense $3,340 - $3,340
Operating income $609 - $609

Adjustment
As-Reported For Acquisitions Same Station
Three Months and Dispositions Three Months
Consolidated Ended Not Included in Ended
June 30, Entire Comparable June 30,
2004 Period 2004

Net operating revenue $35,127 - $35,127
Station operating
expense 23,733 - 23,733
Corporate general and
administrative 2,279 - 2,279
Operating income $9,115 - $9,115

Adjustment
As-Reported For Acquisitions Same Station
Three Months and Dispositions Three Months
Radio Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2004 Period 2004

Net operating revenue $31,362 - $31,362
Station operating
expense 20,469 - 20,469
Operating income $10,893 - $10,893

Adjustment
As-Reported For Acquisitions Same Station
Three Months and Dispositions Three Months
Television Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2004 Period 2004

Net operating revenue $3,765 - $3,765
Station operating
expense $3,264 - $3,264
Operating income $501 - $501

Saga Communications, Inc.
Selected Financial Data Non-GAAP Disclosures
For the Six Months Ended
June 30, 2005 and 2004
(amounts in 000's except per share data)
(Unaudited)

Reconciliation of As-Reported (historical) information to Same Station
Operating Income

Adjustment
As-Reported For Acquisitions Same Station
Six Months and Dispositions Six Months
Consolidated Ended Not Included in Ended
June 30, Entire Comparable June 30,
2005 Period 2005

Net operating revenue $69,384 ($4,687) $64,697
Station operating
expense 51,354 (4,084) 47,270
Corporate general and
administrative 4,126 - 4,126
Operating income $13,904 ($603) $13,301

Adjustment
As-Reported For Acquisitions Same Station
Six Months and Dispositions Six Months
Radio Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2005 Period 2005

Net operating revenue $61,977 ($4,687) $57,290
Station operating
expense 44,725 (4,084) 40,641
Operating income $17,252 ($603) $16,649

Adjustment
As-Reported For Acquisitions Same Station
Six Months and Dispositions Six Months
Television Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2005 Period 2005

Net operating revenue $7,407 $0 $7,407
Station operating
expense 6,629 0 6,629
Operating income $778 $0 $778

Adjustment
As-Reported For Acquisitions Same Station
Six Months and Dispositions Six Months
Consolidated Ended Not Included in Ended
June 30, Entire Comparable June 30,
2004 Period 2004

Net operating revenue $64,300 ($1,047) $63,253
Station operating
expense 45,918 (786) 45,132
Corporate general and
administrative 4,011 - 4,011
Operating income $14,371 ($261) $14,110

Adjustment
As-Reported For Acquisitions Same Station
Six Months and Dispositions Six Months
Radio Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2004 Period 2004

Net operating revenue $57,381 ($1,047) $56,334
Station operating
expense 39,618 (786) 38,832
Operating income $17,763 ($261) $17,502

Adjustment
As-Reported For Acquisitions Same Station
Six Months and Dispositions Six Months
Television Segment Ended Not Included in Ended
June 30, Entire Comparable June 30,
2004 Period 2004

Net operating revenue $6,919 $0 $6,919
Station operating
expense 6,300 0 6,300
Operating income $619 $0 $619

Source: Saga Communications, Inc.

CONTACT: Samuel D. Bush of Saga Communications, Inc., +1-313-886-7070

Web site: http://www.sagacommunications.com/

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