Edward Christian - Chairman, CEO and President Samuel Bush - CFO, SVP and Treasurer.

Analysts:.

Ladies and gentlemen, we thank you for standing by and welcome you to the First Quarter Earnings Conference. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, the conference is being recorded. I will now turn the conference over to Ed Christian, President and CEO of Saga Communications..

Thank you very much, Amanda. Sam will be here momentarily. And Sam, you know that we've been listening too long when we can actually hum the hold music.

I mean, did you ever think about that?.

We've been doing this quite a while, and --..

Do you want me to sing a few parts of the on-hold music that we get? The -- well, copyrighted AT&T music. Okay, go ahead, Sam..

Thanks. 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 is attached in the selected financial data table.

During the quarter, gross political revenue was down $1.3 million, which not so coincidently compares to a net revenue decrease of $1.3 million, certainly not tied together dollar for dollar but pretty close. Gross political revenue for the quarter was $43,000 compared to $1.3 million for the first quarter last year.

All but $62,000 of political revenue last year was radio. All of this year's first quarter political revenue was radio. Without political, gross revenue for the first quarter would have been down 0.8%. Station operating expense increased 1.5%, with almost all of the increase being a result of health care costs.

Without health care, station operating expense would have been down almost 1%. A couple of other areas of expense also impacted our overall station operating expenses. We had a significant increase in music licensing fees as well as a nice reduction in our station ratings expenses.

Taking all three of these areas into account, our station operating expense would have been down 0.4%. Subsequent to the end of the quarter, we did close on the acquisition of another radio station in Charlottesville, Virginia. We began operating this station under WUVA on February 1.

While WCVL-FM C-Ville Country is not material to our numbers for the quarter, it will add a lot to our Charlottesville cluster over time. We purchased the station for $1,650,000. National accounted for approximately 10.9% of gross revenue for the quarter, which was almost equal to 10.7% for the quarter in 2016.

During the quarter, our Board of Directors declared a $0.30 per share quarterly cash dividend with a record date of March 28, 2017, and a payment date of April 14, 2017. Additionally, yesterday, May 3rd, our board declared another quarterly cash dividend of $0.30 per share with a record date of May 22nd and a payment date of June 9.

This will be our 13th quarterly cash dividend, bringing the total dividends paid, including special dividends, over the last five years to $45.3 million. 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 $36.4 million debt outstanding. Cash on hand at the end of the quarter was $30.6 million. Currently, we have cash on hand of approximately $29 million. Retrans revenue was $1.3 million in the quarter, up from $1.2 million for the quarter last year.

Retrans payments to the networks were $293,000 compared to $285,000 last year. Capital expenditures were $1.4 million for the quarter compared to $1 million in 2016. We currently expect our CapEx for 2017 to be between $5 million and $5.5 million. Pacing continues to be uncertain and unpredictable.

April was down mid-single digits, while May is currently expected to be flat to up low single digits. June will be about the same. Ed will talk a bit more about this shortly. We expect station operating expenses to be up 1% to 1.5% on historical basis for 2017.

We expect interest expense to be between $0.8 million and $0.9 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 2017 to be between $3 million and $3.2 million. And with that, I will turn it back over to you, Ed..

I want to just kind of speak on a couple things that you touched on. One is we really got whacked on insurance. We are self-insured, have been for decades. And we play the odds, and that's -- and it usually comes in anywhere from savings of being fully insured to self-insured.

It's $1 million, $2 million a year, somewhere in there, which is our push between the full insurance. And in the first quarter, we had three people who hit the stop-loss, which is totally unusual for us. We can usually go a year with three people hitting a stop-loss. So that's where we took a bit of a whack.

And that was hundreds of thousands of dollars in -- that we didn't see coming. The other is Global Music Rights, a new performing arts organization which we are operating, as the rest of the industry is operating, under an interim license through September. My other day job is the radio music license committee.

And we will be commencing discussions I'm sure with them in the future, but that was an unexpected expense for every broadcaster in the United States that had to face that. So those were really the two efforts of class that we had which kind of showed. And there was no way we could plan for either one of them.

No, it's not that we weren't doing our job on that. Let me talk a little bit about the -- our stations markets, the economy, everything else like that. Back in January, actually the 1st of January, I sent a letter, an e-mail, to all of our general managers and said, Happy New Year. Or is it? The text discussed my feelings on the upcoming Q1.

And I told everyone that I couldn't call it. And usually when I'm on these calls, I am trying to look for signs and get an idea of what's going on because I'm a great believer in the consumer behavior is reflected in broadcast advertising, as they go and try and sense to us. Every time I saw something, I really got -- I was confused.

I couldn't get a clear read of the economic signs on consumer attitudes. Every time I saw something, something go up. I would read a commentary. Or another news story would appear on the other side of the matter. My intuition was that it should be an okay Q1. We had a rising stock market. Elections were over.

And retail Christmas sales weren't great, though should be some built-up desire to shop during January sales. We quickly saw the mixed signals continued and that the new maxim of flat is the new up was coming back into play. I really thought we were past that. I thought it was time that our country breakout of this malaise and indecision.

We are a practical nation, and we certainly showed that during Q1. National revenue for broadcasters was down, as Sam said. And it was down in low double digits actually in national, especially in the major markets. It is a paradox, in kind of very simplistic language. And I thought about this. And I wrote it when I came up with it.

In quantum theory, it's -- I thought I was watching real-life Schrödinger experiments. In quantum theory, you place the cat in a box blocks. And there was a poison and a Geiger counter. In theory, it implies that, after a while, the cat is simultaneously either alive and dead at the same time.

And yet when one looks into the box, one sees the cat either alive or dead, not both alive and dead -- I'm sorry. In Schrödinger's box, you put the cat, and there it is alive and dead at the same time. Did I make myself clear? I don't even really understand Schrödinger's cat..

I'm not sure anybody does, but just stay in the picture..

None of the services can be delivered by UPS to your front door. We've always had a large service economy, but sometimes we get seduced by the large nature of retailers and forget about our basics. Getting back to basics is what helped us to be flat, though there really aren't any bragging rights on being flat. Some other areas I just want to share.

We've primarily operated Saga for the last three decades in four distinct quadrants. We like to do business in recession-resistant communities that have large universities; large state capitals, non-closable military bases or communities reclaim agriculture. We've built this company market by market.

We never win on acquisition bids, as you might find that in your haste to buy quantity you also find some very strange remnants stuffed into your bag. However, Q1 presented some unusual problems. For example, we do business in Illinois, both in Champaign, the University of Illinois; and Springfield, which is a state capital.

Never did we anticipate that Illinois could experience the possibility of having its bond debt rated junk or going without a budget for several years, as political camps became very divisive. And frankly, it's a mess. And Illinois is a mess. It could mean an important recon. And it has affected business in both of our markets there.

The state debt is billions, and there are continued threats to raise both income tax and sales tax. More people leave Illinois every day. This affects morale and consumer confidence and hurts our sales efforts. Both markets in Illinois were off in Q1. Second is a farmer economy. And we have four distinct Ag business stations.

The agriculture markets rely a lot on soys, and our markets rely a lot on soys. Unfortunately, there's a glut in prices. Glut and prices have dropped precipitously. This of course affects farm income. Overall, net farm income is forecast to decline by 8.7% to $623 billion for 2017, fourth year in a row in decline.

And if the predictions are realized, net farm income in 2017 will be the lowest since 2002 in inflation-adjusted terms. So flat could have been worse. In fact, it did spill over into Q2, as April was very anemic. Fortunately, as Sam said, May and June are pacing up, so go figure.

Perhaps it was an aberration for the first four months, but admittedly it's getting harder and harder for a -- not just radio and TV but for all industries to read the tea leaves. On the good side, what we do know is that broadcasting is alive and well, not alive and dead, alive and well.

Maybe we are not a sprinter right now, but for instance, 275 million people a week still listen to real radio. And advertisers recognize it is a mass-affective medium. If we continue to keep it local, and you have our promise that we will, we will continue to be both profitable and professional at the same time.

But there's no question the economy needs consumers to shop again. The GDP growing just 0.7% in Q1 is not a good sign. It was the weakest showing in three years. Couple this with the fact that consumer spending grew at just a 0.3% annual rate. It's the slowest showing since the fourth quarter of 2009.

And please remember that consumer spending accounts for about two thirds of the economy, and it's not part of GDP. Now we haven't hit the panic button, and we don't intend to. Risks and expense cuts just into the product that we are becoming more disciplined as an industry and more prudent in our decisions. We won't cut quality or size of what we do.

Companies actually are kidding themselves if they think the consumer doesn't realize when a product shrinks its size. Sam mentioned that we acquired WCVL-FM in Charlottesville. That brings it up to six radio stations in that market.

We have been very, very active in and I talk like a president but I keep it very, very -- we have been very, very, very active in viewing acquisitions and other corporate matters. I do believe that, for the first time in some years, there are some really good buying opportunities that are coming available, and we do plan to take advantage of that.

We always welcome good stations in good markets. It's been an easy four months since the start of the year, but as I said, I am buoyed by May and June. I'm an optimist, and I know broadcasting is a wonderful mass-appeal marketing tool.

To us, when we open the box every morning, we know that our cats and kittens are alive and well and working diligently to sell forward and serve our communities. We can do both very well at the same time. And I think it pretty well wraps it up. It's still a good business. These are difficult times not for us but for many, many industries.

We saw this in automotive in April. Was a tough, tough month for us with automotive, but that's coming back in May. So all I can tell you is that we right now take each day at a time and each month at a time.

It is very difficult to even try to carve out budgeting or project forward because we are so much at the mercy, as every industry really is, at the momentum of the consumer and the country. And with that -- we don't have any questions, Sam, I guess. ..

No. We -- the questions we got were all pretty -- we're getting pretty good at this that we've been doing long enough that we're covering most of those now in the commentary..

All right, Amanda, I think we've wrapped it up at this time. So if you want to do your closing comments, it's back to you..

[Operator Instructions].

Q - :.

Certainly. Well, ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using the AT&T Executive Teleconference Service. You may now disconnect your line..