Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Acquisitions and Dispositions

5. 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. 

Pending Acquisition

On November 2, 2015, we entered into an agreement to acquire an FM radio station (WLVQ) from Wilks Broadcast – Columbus, LLC, serving the Columbus, Ohio market for $13,000,000. This transaction is subject to FCC approval and we expect to close on this acquisition in the first quarter 2016. We plan to operate this station under a LMA on or before November 16, 2015.

2015 Acquisitions

On July 13, 2015 we acquired an FM translator serving the Manchester, New Hampshire market for approximately $45,000.

On August 1, 2015 we acquired two AM and three FM stations and one FM translator (WSVA-AM, WHBG-AM, WQPO-FM, WJDV-FM, WTGD-FM and W221CF-FX) from M. Belmont VerStandig, Inc., serving the Harrisonburg, Virginia market for approximately $10,131,000, which included $128,000 in transactional costs. Cash was utilized to fund the acquisition. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Harrisonburg, Virginia market as well as the synergies and growth opportunities expected through the combination with the Company’s existing stations.

On August 26, 2015 we acquired an FM translator serving the Asheville, North Carolina market for approximately $125,000.

On September 1, 2015 we acquired two FM stations (WSIG-FM and WBOP-FM) from Gamma Broadcasting, LLC, serving the Harrisonburg, Virginia market for approximately $1,558,000, which included $92,000 in transactional costs. Cash was utilized to fund the acquisition. FCC multiple ownership rules prohibit us from owning both of these stations. In order to satisfy the multiple ownership requirements and receive FCC approval for this acquisition, we simultaneously donated WBOP-FM to Liberty University, Inc, a charitable organization. In exchange for donating WBOP-FM, including the Station, the FCC License and the Assets, we received an FM Translator W267BA, the FM Translator Assets, and the FM Translator FCC license. We incurred a loss of $400,000 as a result of this donation. This loss is recorded in other operating (income), expense, net on the Company’s Condensed Consolidated Statements of Income and reported in cash flows from operating activities on the Condensed Consolidated Statement of Cash Flows. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Harrisonburg, Virginia market as well as the synergies and growth opportunities expected through the combination with the Company’s existing stations.

2014 Acquisitions and Dispositions

On January 31, 2014 we acquired one FM station (WFIZ-FM) and three FM Translators serving the Ithaca, New York market for approximately $720,000.

On February 28, 2014 we acquired an FM translator serving the Jonesboro, Arkansas market for approximately $35,000.

On May 9, 2014 we acquired an FM translator serving the Clarksville, Tennessee market for approximately $30,000.

On May 14, 2014 we acquired an FM translator serving the Portland, Maine market for approximately $44,750.

On May 16, 2014 we acquired two FM translators serving the Asheville, North Carolina market for approximately $100,000.

On June 16, 2014 we acquired an FM translator serving the Des Moines, Iowa market for approximately $87,500.

On November 4, 2014 we acquired an LPTV servicing the Victoria, Texas market for approximately $18,500.

On December 2, 2014 we sold the Michigan Radio Network, the Michigan Farm Network, the Minnesota News Network and the Minnesota Farm Network, for approximately $1,640,000. The net assets of these networks approximated $430,000, and as such recognized a gain of approximately $1,210,000 that is included in Other operating (income) expense in our 2014 Consolidated Statements of Income. The proforma results of operations for the sale of these networks is not material to our financial statements and as such are not presented. These radio networks have historically been presented within our radio segment. The radio networks did not meet the criteria of discontinued operations.

Condensed Consolidated Balance Sheet of 2015 and 2014 Acquisitions:

The following unaudited condensed balance sheets represent the estimated fair value assigned to the related assets and liabilities of the 2015 and 2014 acquisitions at their respective acquisition dates. The allocation of the purchase price for the 2015 acquisitions is preliminary at September 30, 2015.

Saga Communications, Inc.

Condensed Consolidated Balance Sheet of 2015 and 2014 Acquisitions

	Acquisitions in
	2015		2014
	(In thousands)
Assets Acquired:
Current assets	$	976	$	45
Property and equipment		4,600		425
Other assets:
Broadcast licenses-Radio segment		2,098		219
Broadcast licenses-Television segment		—		19
Goodwill-Radio segment		2,528		325
Goodwill-Television segment		—		—
Other intangibles, deferred costs and investments		1,507		3
Total other assets		6,133		566
Total assets acquired		11,709		1,036
Liabilities Assumed:
Current liabilities		70		—
Total liabilities assumed		70		—
Net assets acquired	$	11,639	$	1,036

Pro Forma Results of Operations for Acquisitions (Unaudited)

The following unaudited pro forma results of our operations for the three and nine months ended September 30, 2015 and 2014 assume the 2015 acquisitions occurred as of January 1, 2014. 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.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
	(In thousands, except per share data)
Pro forma Consolidated Results of Operations
Net operating revenue	$	34,243	$	35,433	$	99,723	$	100,828
Station operating expense		24,654		27,151		73,362		75,186
Corporate general and administrative		2,577		2,307		7,642		6,580
Other operating expenses, net		433		—		447		—
Operating income		6,579		5,975		18,272		19,062
Interest expense		229		268		714		812
Write-off of debt issuance costs		557		—		557		—
Other (income) expense, net		—		7		(417)		(38)
Income taxes		2,632		2,293		7,399		7,339
Net income	$	3,161	$	3,407	$	10,019	$	10,949
Basic earnings per share	$	.55	$	.60	$	1.76	$	1.92
Diluted earnings per share	$	.55	$	.59	$	1.74	$	1.90

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
	(In thousands)
Radio Broadcasting Segment
Net operating revenue	$	28,948	$	30,460	$	84,302	$	86,377
Station operating expense		21,155		23,867		63,028		65,395
Other operating expenses, net		400		—		414		—
Operating income	$	7,393	$	6,593	$	20,860	$	20,982

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
	(In thousands)
Television Broadcasting Segment
Net operating revenue	$	5,295	$	4,973	$	15,421	$	14,451
Station operating expense		3,499		3,284		10,334		9,791
Other operating expenses, net		33		—		33		—
Operating income	$	1,763	$	1,689	$	5,054	$	4,660

Reconciliation of pro forma segment operating income to pro forma consolidated operating income:

					Corporate
	Radio		Television		and Other		Consolidated
	(In thousands)
Three Months Ended September 30, 2015:
Net operating revenue	$	28,948	$	5,295	$	—	$	34,243
Station operating expense		21,155		3,499		—		24,654
Corporate general and administrative		—		—		2,577		2,577
Other operating expenses, net		400		33		—		433
Operating income (loss)	$	7,393	$	1,763	$	(2,577)	$	6,579

					Corporate
	Radio		Television		and Other		Consolidated
	(In thousands)
Three Months Ended September 30, 2014:
Net operating revenue	$	30,460	$	4,973	$	—	$	35,433
Station operating expense		23,867		3,284		—		27,151
Corporate general and administrative		—		—		2,307		2,307
Operating income (loss)	$	6,593	$	1,689	$	(2,307)	$	5,975

					Corporate
	Radio		Television		and Other		Consolidated
	(In thousands)
Nine Months Ended September 30, 2015:
Net operating revenue	$	84,302	$	15,421	$	—	$	99,723
Station operating expense		63,028		10,334		—		73,362
Corporate general and administrative		—		—		7,642		7,642
Other operating expenses, net		414		33		—		447
Operating income (loss)	$	20,860	$	5,054	$	(7,642)	$	18,272

					Corporate
	Radio		Television		and Other		Consolidated
	(In thousands)
Nine Months Ended September 30, 2014:
Net operating revenue	$	86,377	$	14,451	$	—	$	100,828
Station operating expense		65,395		9,791		—		75,186
Corporate general and administrative		—		—		6,580		6,580
Operating income (loss)	$	20,982	$	4,660	$	(6,580)	$	19,062