Ladies and gentlemen, thank you for standing by, and welcome to the third quarter earnings call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, President and CEO of Saga Communications, Ed Christian. Please go ahead, sir. .

Thank you, Roxanne, I appreciate it. And thank you, everybody, for joining us on our third quarter call here. Welcome to all of you. And next up will be Sam Bush. And just a word of intro here. Sam admitted to me earlier today that there are lots of words that he's going to be using today with lots of twists and turns.

So, my advice to you is to keep your eye on the bunny, and I want you to listen very carefully so that you're fully either briefed or confused. However, your solace will be that you can call Sam after the call and he'll walk you through number by excruciating number, if you wish.

With that said, as usual, here's Sam?.

Thank you, Ed. I'll start with the perfunctory. 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..

I'm not going to spend as much time this quarter talking about the numbers, as I think the time is better spent in making sure that it is clear what the numbers represent. As you are looking at our financial performance for the quarter and 9 months, remember that we reclassified our television assets as held for sale last quarter.

And as such, their financial performance moved to being reported as discontinued operations. .

The sale of the television stations closed on September 1 of this year. Their operations data for the quarter and for the 9-month period ending September 30 is recorded on the selected consolidated financial data as income from discontinued operations. .

Keep in mind that Saga realized a gain of $29.9 million net of tax on a sale, and that is included as part of the income from discontinued operations, thus making a comparison to last year a bit difficult.

We did include a supplemental schedule with our press release showing additional financial data on the operations of the television stations, including net operating revenue, station operating expense, operating income, et cetera. .

As you look at the detail of the discontinued operations, keep in mind that television was only a part of Saga for 2 months during the third quarter this year compared to the full quarter in 2016. Also consider that there was no gross political revenue during the third quarter of 2017 in television compared to $1.2 million last year. .

Year-to-date, there was no political revenue in television this year compared to $1.5 million last year. We were able to put approximately $23 million of the television sale proceeds immediately to work with the acquisition of radio stations in both the Charleston and Hilton Head, South Carolina markets.

These station results are included for only 1 month of our historical numbers during the third quarter. They also are also included in the pro forma numbers with the release for this quarter and for year-to-date. .

Primarily because of the Charleston and Hilton Head acquisition, we had increased our expected capital expenditures for the full year to $6.5 million. Including 2017 and 2018, we will invest approximately $1 million in bringing these stations up to our operating standards as we fully integrate them into Saga.

This expected expenditure also represents ongoing reinvestments in several of our market facilities, including studio and general office upgrades in Portland, Maine and Charlottesville, Virginia, and replacing a couple of towers in Harrisonburg, Virginia, in addition to our more traditional regular CapEx maintenance projects.

Charlottesville also includes building studios for our acquisition of WCVL earlier this year. .

Also, when you look at the quarterly results, keep in mind, as was pointed out in the press release, that during the third quarter in 2016, we sold a tower in Norfolk, Virginia, which resulted in a $1.4 million gain being reported last year. .

In radio, political revenue was not really a factor in the quarter, with $300,000 being recognized this quarter versus $500,000 for the quarter last year. Year-to-date, political revenue does factor in.

As for the 9 months this year, we have approximately $600,000 in gross political revenue while we had approximately $1.9 million for the same period last year. .

Overall, I believe this quarter's results represents a good performance given all the facts and circumstances. Revenue growth continues to be a challenge, one that is partially answered by our focus on controlling expenses.

National radio revenue accounted for approximately 11% of gross revenue for the quarter, which was approximately the same as the quarter in 2016. .

At the end of the quarter, we had $35.3 million debt outstanding. Cash on hand at the end of the quarter was $81 million. Currently, we have cash on hand of approximately $72 million and our current outstanding debt is $25 million. .

During the quarter, our Board of Directors declared a $0.30 per share quarterly cash dividend, with a record date of September 25 and a payment date of October 13. This was our 14th quarterly cash dividend, bringing the total dividends paid, including special dividends over the last 5 years, to approximately $47 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. .

The fourth quarter started out with October pacing up, excluding political. November and December are still too early to tell, but the waters are still very choppy. We expect same-station operating expenses to be down approximately 1% for 2017. We expect interest expense for 2017 to be between $700,000 and $800,000.

Our anticipated total tax rate going forward will be between 41% and 42%. Obviously, that will depend on how the ventures in Washington go with the tax reform. We anticipate differed taxes for 2017 to be between $3 million and $3.2 million. .

Ed, I will gladly turn the call back over to you. .

Thank you, Sam. And I'm not going to go through a lot of numbers because you sure did a lot of numbers, and I don't think people really care whether we were up 3% in automotive and down 4% in health care. Those are made-up facts, by the way. But -- so let's kind of get into this.

I do want to do a little bit of a shout out to everybody in finance in Grosse Pointe because for the last 4 or 5 months, it's been chaos at times.

Sam had a great line the other day when he talked about Cathy Bobinski, who's been our controller and with us for decades, that there was an e-mail sent at 4:00 in the morning and that wasn't because she got in there early that day.

But to Cathy and her team of [ Katie, Cindy, Steve, Mike and Martha ] and also [ to Seth ] at UHY in Detroit, they did great efforts on this. .

And, Sam, I have to just tell you, I had a temporary brain freeze when you were reading the numbers, and I ended up watching a woodpecker out my window. But I'm back, I'm good to go and I'm ready to start. .

But first off, Mr. Bush, there are a few questions. We thank you for coming here today and we thank you for your testimony. But there's a couple of questions we'd like to ask. .

As Chief Financial Officer of Saga Communications, an NYSE American stock company, and I say the word "American," can you unequivocally state that Saga Communications has not accepted any funds for advertising from the Russian government for Saga stations?.

Yes, I can certainly state that Saga has not accepted any advertising from the Russian government or at least I think so. .

Well, now, Mr.

Bush, are you either assured or not assured, to the best of your knowledge?.

To the best of my knowledge. .

Thank you. All right. Mr.

Bush, do you have or do you know any or are you associated or do you have any plans to associate with any Chief Financial Officers of Russian-owned companies or representatives of the Russian government?.

I do not know any Russian CFOs or any representatives of the Russian government, although I do keep a bottle of vodka in my freezer from time to time. .

Thank you.

Russian vodka?.

Yes, of course. .

Actually, it's American vodka, but that's another story. Now, Mr. Bush, if you were to please tell me if Saga Communications has any bots working for the company that create false advertising; after all, you know those tiny minions are sneaky little fellows and they're probably made by the Russians or the communists.

Next thing, you'll probably be getting is this artificial intelligence. And I did see the movie Blade Runner last week and I read I, Robot by Isaac Asimov.

So do you have any bots, as advertising agencies are getting really worried about them, distorting advertising?.

The only bot I know is a [ Mr. Bott ], and he was a high school teacher. I don't think he looks like a minion. .

So the answer would be no then?.

That is correct. .

Now one final question.

Do you have an Executive Vice President and Chief Operating Officer named Warren Lada?.

Yes, I do know Warren. .

Are you aware that his great grandparents were Russian immigrants and that there was a Russian automobile company named LADA?.

Yes, I am aware of that. .

Mr. Bush, isn't it a fact that Mr.

Lada also owns 2 of those cars?.

Yes, but they really don't run very well. .

Thank you, Mr. Bush, for your testimony. You can never tell about those Russkies. So after all, I did watch Dr. Strangelove, and General Buck Turgidson, whatever, is really my kind of guy. Did you see him in -- it's played by George C. Scott.

Did you see him in Patton?.

I did, absolutely. .

That's good. Thank you, Mr. Bush. But one final question before we get into everything else.

Did you return recently from Germany, maybe even East Germany, on a vacation, supposedly going to the Christmas markets?.

Yes, I did. .

Thank you for candor, Mr. Bush. We will now continue on with our next questions. The point that I'm trying to make here -- and there actually is a point on this, is that we tend to get afraid of things we don't know or understand. And also, it's easy to lose ourselves in big data and quote facts and figures.

But we -- those of you who read the broadcasting trades or are in the industry know that the advertising agencies are very concerned in digital advertising that there's such a huge amount of fraud going on. It's hard to complicate radio, though.

And I think that's what I wanted to try to get down to a little bit today is that radio is pretty simplistic when you look at it. If you do your job correctly and present compelling program and super serve your local community, people will listen. I've said this before.

If you -- and if you write compelling copy, which we attempt to do and run it with frequency, people will respond and your advertisers will be happy. It's a very simple formula, yet we find ourselves surrounded by big data all the time.

And this happens -- in fact, I'll just give you a short story that Warren and I were on the phone with the head of marketing from a major public company about a week ago. And we're talking about radio and what power it could do as we try to make our calls to bring other companies into broadcasting.

And the marketing person said, "Well -- he kept referring to the KPIs.

Well, we haven't really looked at the KPIs on this yet -- on KPIs, and I had to turn to Warren quietly on the phone and say, "What's a KPI?" And do you know what a KPI is, Sam?.

I do not. .

Okay, key product indicator. Now I feel really hip that I understand all this stuff now. If you like, I'll [indiscernible].

I'm impressed. .

Okay. Next, I'll claim I'm a millennial or something. Anyway, don't make -- to all of you out there, don't make the mistake of sweeping with a broad brush. What's great about radio is that the communities that we serve allow us to develop relationships with our clients one on one. We specialize in midsized markets.

And we understand their problems, their frustrations. And this had been a pattern for radio advertising for decades, solve the problems one by one. And admittedly, we know that there is a paradigm shift in communications.

And all the companies are trying to figure it out, whether it be television, newspaper, cable channels, direct mail and so on and so on. Companies feel challenged and need to assure their shareholders that everything is all right and that they've got a master plan to go along with change. Well, we address this at Saga by staying true to our core.

True to our core competencies, actually, and also by including supplemental solutions to help our advertisers, whether it be digital contesting, texting or whatever. We even -- we do have a dedicated team that is always creating tangential alternatives for us to employ in the sale process.

So we're not sitting here just saying, well, we have radio, but we also have a lot of other things in our toolkit. But we're not going out trying to reposition ourselves as an all-media company, or something like that. We are radio broadcasters. Clear and politely said, that's it. And we are also fiscally sound and professionally creative.

Great combination. Solid medium, solid financial position and a lot of creativity going on. .

Do we have issues at Saga? Of course, we do. And we're addressing them on a case-by-case basis with laser-like intensity. We admittedly do push for excellence and we try to differentiate ourselves from the pack.

In truth, we find out that a lot of time when we go out and talk to people in the industry that they know of Saga and they're aware of it, and they recognize what we do. We just don't brag about it. It's not our nature. It's the responsibility of our professionals not to settle for second place, however.

And in each and every one of our markets, the word Saga is never used. We brand all of our markets on a local basis with local names, Charleston Radio Group, the Lowcountry Radio Group, an example of what we just did in Charleston, South Carolina and the Hilton Head area there. .

Buy lots of radio advertising with creative copy across the U.S. and you and your product will be successful.

And that's really the case, and it's simplicity that we -- and we admire that all of this other stuff and all of these other key metrics and all the things where people will come and say, “We're looking for left-handed men who wore a blue suit -- who wear blue sport coats and want to drive Jaguars.” I mean, we get to the point where we're missing the point that radio is about reach and it's about frequency, and it's about the continuing effort in branding your product.

.

"Every turnip green. Every kidney bean. Every plant grows according to the plot. That's why I like vegetables. You know what they're about. Life is merry. It is very vegetarian. A man who plants a garden is a very happy man.".

Well, folks, radio is my garden and I'm a happy man. And radio works in so many ways. And our commitment is to you, if you are a stakeholder in Saga -- if not, you can call your broker today and become one -- is that we know what we're doing. We focus on it intensely every single day. And we challenge our people to do so.

In a complicated world, we always get down back to basics. I'm always reminded of Vince Lombardi, the great Green Bay Packer coach, who, after a terrible game, called all his players into the locker room and said to them, "Gentlemen, we're going to get back to basics." And he picked up the ball and said, "This is a football.

So, our whole job here is to always remember the basics of what we do and to focus on them. And if we do our job right, then we can come back here and say, "Yes, we're up 1%. The industry is up 1%." But we're not sitting here trying to reinvent everything we do.

We're trying to add depth to our products, depth to the field of what we do and, in result, make it easier for us to sell in a simplistic fashion to our advertisers and get results for them. That's what it's all about. .

Sam, do we have any questions, by any chance?.

We had a number of questions, but most of them we've talked about. The only question, which I think I'll answer, is that we've got, as we've gotten before, is what do we expect to do with the capital we have on hand, the cash we have on hand? And as you have stated before and it's all still... .

I can probably tell where it came from. .

From a number of places, actually. But the answer to that is, is we're still working through that. We just worked through where we were with taxes. And obviously, we all have our fingers crossed, if something happens in D.C. that can make that even a brighter picture for us. We are still looking at acquisitions.

The window did close on our 1031 like-kind exchange. So we were able to do the Hilton Head and Charleston acquisitions with that and defer some taxes for a later date. And we still are looking at other acquisitions. They won't be done through a like-kind exchange, and we don't have anything that's going to happen in the next 30 days.

But Ed is always working the phones and looking for those. And obviously, as we move toward our December board meeting, there will be conversations about special dividends in addition to the regular quarterly dividend that we just paid. .

We have the stock buyback plan in place. .

That is correct. .

Everything on that. But I think one of the things that a lot of people don't understand on the tax-deferment aspect of this, and it was a great learning experience also for me, is that you really now have to match up assets like tower for tower, land for land, building for building.

And it's not the easy thing of just identifying something as it was many years ago and saying, "Okay, this is a like-kind exchange." Doesn't quite work that way anymore.

It's much more detailed, which took -- and by the way, that's why our expenses were up with accounting and legal in the last quarter, because we had a lot of advice having to get through this.

Are there any other questions that we should answer?.

That -- no, that is it, that we've already covered everything else, I believe. .

Another successful 21-minute phone call. Roxanne, it's all up to you for the wrap-up. .

Ladies and gentlemen, that concludes our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect. .

Thank you, Roxanne. .

Thank you. Have a good day..