Ed Christian - President and CEO Sam Bush - CFO.

Ladies and gentlemen we do appreciate your patience, and welcome to the third quarter 2014 results conference call. At this time, all participants are in a listen-only mode. Later we'll a conduct a question-and-answer session; instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, President and CEO of Saga Communications, Christian. Please go ahead, sir..

Hello, this is Ed Christian, not to be confused with any other Christian above. Thank you very much moderator. And with that I will turn it over to Bush, Sam. .

Thank you, Ed. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial measures.

Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data table. During the quarter, net revenues increased 4.4% to 34.4 million. Station operating expenses increased 2.8 million.

The increase was primarily due to an accrual attributable to the company's expectations of entering into license agreements with Neilson sometime in the fourth quarter. We expect there will be an additional charge in the fourth quarter once the agreements are finalized.

Our expectations of the amount is that it will be significantly less than the third quarter accrual. The expense has been accrued in anticipation of reaching a resolution with Neilson. Free cash flow for the quarter was 4.9 million. We anticipate free cash flow for the year of between 19 million and 20 million.

National accounted for approximately 13.3% of gross revenue for the quarter compared to 14.1% for the same period last year. Gross political revenue for the quarter was 1.1 million compared to 206,000 for the same period last year. Radio was 942,000 this quarter versus 69,000 last year. Television was a 176,000 compared to 137,000.

Total political year-to-date through third quarter was 1.7 million versus 440,000 last year. We expect political revenue for the year to be between 4.4 million and 4.8 million. Subsequent to the end of the quarter, we paid our second quarterly cash dividend of $.20 per share.

The dividend was paid on October 17 and was in the amount of 1.1 million, bringing the total dividends paid in 2014 to 2.2 million. We have now returned over 19 million in cash to our shareholders.

We intend to pay regular quarterly cash dividends in the future as well as considering special cash and stock dividends as declared by our Board of Directors. At the end of the quarter, we had 40.1 million debt outstanding. Keep in mind that our current debt structure includes a 30 million term loan and a 90 million revolver.

The term loan is fully drawn. The revolver can be drawn up again at any time for use in an acquisition dividend or buyback subject to pro forma covenant compliance with our leverage is not an issue. Cash on hand at the end of the quarter was 28 million. Retrans revenue was 627,000 in the quarter, up from 582,000 last year.

Retrans payments to the networks were 182,000 in the quarter compared to 134,000 last year. We will be entering into retrans negotiations in both our TV markets later this year, there will be no significant impact from these negotiations for the remainder of 2014. Interest expense for the quarter declined to 268,000 from 308,000 last year.

Capital expenditures were 887,000 for the quarter compared to 1 million last year. We currently expect our CapEx for 2014 to be around 5.5 million. We expect interest expense for 2014 to be between 1.1 million and 1.3 million, given the existing interest rate environment. Our anticipated total tax rate going forward will be between 40% and 41%.

We anticipate deferred taxes for 2014 to be between 2.8 million and 3 million. Fourth quarter is currently pacing up mid-single digits. Ed, I will turn it back over to you now..

Thank you, Sam. So this could be a brief call as I am in the process of recovering from sinus infection which became a tad bronchial. If I leave the phone from when I knew it, is because my cough sounds kind of like charging right now, so please bear with me. Even getting a (Zepax) [ph] quite didn’t work.

As the first question that anyone else asks when you call nowadays is have you been out of the country lately. I had a response and said yes about a month ago. And then he asked where, and I replied Iceland. And the healthcare providers take a step or two backward, so I don't know what that's, any issue there.

Nevertheless I'm fine, just controlling my cough as best possible so bear with me on this. Now let's talk about the quarter. I am really pleased with the revenue. Certainly this is still challenging marketplace. And any up is good, any up is good up. But I do think we made a difference with our sales efforts.

On a global basis, here is what radio and television is kind of up against and here is what we have overcome. Let’s take a look at the U.S for a second here. Good side employment claimed sold 10,000 last week and that with at the lowest levels since 1979, nice. U.S. consumer spending held relatively steady in October, another good sign and U.S.

productivity grew 2% in quarter three. Greater productivity is considered a key factor in determining rising living standards, you all know that. And finally overall economy is measured by GDP, grew at an annual rate of 3.5% in Q3.

So with all that good news which believes radio and TV advertising sales, why aren't we doing better? Now I guess the quick answer looking around is that global economies don't match the U.S. And honestly there still is a great deal of collision.

If you talk to a number of economists you'll get different views but a number of them feel that Europe is signing edge of another recession, growth has slowed in China, we know that, that I think is secret. Good economic news is not coming from Germany, from France. And believe it or not, news like this makes the consumer just a tad more cautious.

Based on the recent history we know that. For instance new home sales have slowed markedly, and these are all things that really focus in and you don't sometimes do not think about it is the macroeconomics of what we have to deal with in trying to sell advertising.

Again, we give away our product, it’s free, it's one of the wonderful advantages we have with radio and TV, it's free over the air, anybody can have it, we have to make money in different other ways. Can't tell you too companies that give away their product to anybody who shows up and are still profitable but our industry is.

We are watching market changes occur in the business and while we are doing a very great job in relationship building with our advertisers, our national revenue is lacking, and it went from 14.1 to 13.3 and the same just brought up to you. We recognize the need to try to rebuild that area of our business, that's an important thing for us now.

We are watching these changes occur and mean to add a few gameplays or play start game book. We definitely need to rebalance and focus on agency and national business and our larger markets. And we're beginning steps to facilitate this.

Now we talked about it a little bit on the last conference call, but it's becoming clear that programmatic buying is making inroads and radio and TV is in its sights. Just recently Honda for instance used programmatic buying to target (in mart) [ph] shoppers on Facebook. So stay with me for a minute here because I got to read something.

It's put up by the interactive advertising bureau which I didn’t really know there was one. A note to RAB and TVB pick up the pace and thanks to Warren Lada who sent this to all our managers and sales managers. Let me explain about the programmatic buying so you see where are going on this.

About programmatic buying, programmatic buying explained, it has the potential to transform how advertising is bought and sold. Yet programmatic buying maybe the least understood concept in radio and it's caused a great deal of confusion, here is what you need to know.

What is programmatic also known as automated buying or machine based sales? Programmatic buying and selling and adverting inventory involve software platforms that connect a client with an order of agencies and advertisers use demand side platforms, maybe the companies use supply side platforms.

Both types of platforms are often connected to an ad network or exchange. Real life humans are still required to optimize ad campaigns and the plan strategies, well at least that is still reassuring I guess. Is real time bidding, RTB the same as I think is programmatic.

A real time bidding is a subset of programmatic buying where audience impressions are auctioned off in real time. What are the main types of programmatic transactions? There are four main types of programmatic buys with two variables determining which bucket a buy fits into.

Are the prices set and what type of inventory is offered? Here we go, automated guaranteed, this type of transaction is most closely mirrored a traditional direct sale. Pricing is fixed, inventory is reserved and both are guaranteed and the deal is negotiated directly between buyer and seller but the RFPN campaign trafficking are automated.

On a reserved fixed rate, transactions that fall into this category exist with an exchange environment but have pre-negotiated fixed pricing such as a cost per thousand or cost per click. Typically unreserved fixed rate deals are driven by a thousand -- are driven by advertisers demand for a more predictable offering than auction based sales.

Invitation only option, what I didn’t know about. One of the two types of transactions where buyers bid on inventory, here a publisher restricts participation to select buyers, advertisers via a white list or a black list while they involved other reserved inventories someone may exercise some information about what's being offered to add value.

Any open auction is the last one. Considered a wild west programmatic an open auction is available to any and all buyers with typical no direct relationship between buyer and seller. Advertisers are often unaware of what the publishers they are buying, I think price line.

Publishers may choose to use black list and forward pricing to prevent advertisers from getting access. This is from the Interactive Advertising Bureau. If you would like a copy of this, [indiscernible] at Sagacom.com and Warren will send it out to you and I think it’s something you should most assuredly look at to understand what's going on.

So after months of review and discussion, we really know that we can no longer ignore what is coming. We need to do with craftsmanship our interesting core competencies in broadcast sales and embrace the methodology of buying and selling in a transactional world.

Whether or not why we get to the point of having restricted and non-restricted inventory is another issue. We will need to find ways to work in both worlds and possess the tools to work on a level playing field and in agency defined business. [Indiscernible] start-up cost and certain expenses which were incurred in Q3.

So that currently gives you an idea what's happening a little bit on the programming side of everything and the one thing I want to see what's new inside that, no new stations that were active in seeking out opportunities that mirrored our attention. We are also evaluating all of our component parts as we continue to focus on what Saga does best.

And by new year end we'll also have come close to completing our contract with [Ebiquity] and we now have 52 stations in our radio group broadcasting in high def. It sounds like a paradox, nothing is changing but changes are occurring and they are good for us. We are comfortable with the way Q4 is playing up, Sam told you what we are running up.

Fourth quarter and it looks good all the way through December if December holds, it would be a very nice for our industry and gives everybody a good sense of balance on this. Comfortable with the way Q4 is playing as I said and I think 2015 could be a good year even without political advertising. My thanks again before we go to questions.

If Sam has any [indiscernible] Bunzel Media report, if you do not subscribe to it, I urge you to take a look at it; it has some very good things in helping shapes a lot with bunzelmedia.com. And I look forward to getting this information because it really puts kind of a perspective on what we are doing. We've got good people doing good things.

We need to change a little bit, we understand that. We are [indiscernible] we don't live in a vacuum and we are making the moves to keep Saga moving forward as a growing company and keeping our shareholders happy and keeping our employees motivated and believe by what we do which is compelling radio and television broadcasting.

And with that Sam do we have any questions?.

And we've actually got several questions Ed, but either you or I for the most part have answered the questions in our comments already, at least those that we can answer in detail but that's being asked for. So we are good at this point I think to turn it back over to moderator. .

Well is it safe to say that they can call you say Sam if anything?.

Absolutely..

Okay. 318867150 ask for Sam or ask for Bush I guess. That should catch you in the right place. And with that we just want our moderator do the wrap up for us, or maybe now.

Sam do you want to do the wrap up?.

I guess so..

Thank you all for joining us on this conference call. This has been a little erratic today and it’s a free form as we are going to do. The tapes will be available in a dial in number and will be posted on our website once the transcript is ready and thank you all for joining our third quarter Saga earnings call. .

Thank you Ed for wrapping it up for us. .

And that does conclude our conference for today, we thank you for your participation and for using the AT&T executive teleconference, you may now disconnect..