UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended ~~September 30, 2008~~March 31, 2009


o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number 1-11588

Saga Communications, Inc.

(Exact name of registrant as specified in its charter)


Delaware		38-3042953
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		~~(I.R.S. Employer~~ Identification No.)

73 Kercheval Avenue
Grosse Pointe Farms, Michigan		48236
(Address of principal executive offices)		(Zip Code)

(313) 886-7070
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesþ Noo.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yeso Noo.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filero		Accelerated filerþ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller ~~reporting company~~ Reporting Companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Noþ

The number of shares of the registrant’s Class A Common Stock, $.01 par value, and Class B Common Stock, $.01 par value, outstanding as of ~~November 3, 2008~~May 4, 2009 was ~~14,451,582~~3,664,552 and ~~2,402,338,~~599,614, respectively.

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,
	2008			2007			March 31,			December 31,
	(Unaudited)			(Note)			2009			2008
	(In thousands)						(Unaudited)			(Note)
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	7,997		$	13,343		$	8,020		$	6,992
Accounts receivable, net		22,269			23,449			16,346			20,091
Prepaid expenses and other current assets		5,176			4,590			3,434			5,072
Barter transactions								1,804			1,532
Deferred income taxes								1,118			1,114

Total current assets		35,442			41,382			30,722			34,801
Property and equipment		156,680			153,504			158,804			157,829
Less accumulated depreciation		82,791			77,287			86,594			84,446

Net property and equipment		73,889			76,217			72,210			73,383
Other assets:
Broadcast licenses, net		169,001			163,102			107,673			107,673
Goodwill, net		54,976			49,661
Other intangibles, deferred costs and investments, net		6,507			7,282			6,242			5,603

Total other assets		230,484			220,045			113,915			113,276

	$	339,815		$	337,644		$	216,847		$	221,460


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,486		$	3,017		$	1,374		$	1,447
Payroll and payroll taxes		6,562			7,722			5,430			7,326
Other accrued expenses		4,708			4,848			3,181			3,804
Barter transactions		2,314			1,720			2,083			1,786
Current portion of long-term debt		1,061			—			2,350			1,061

Total current liabilities		16,131			17,307			14,418			15,424
Deferred income taxes		40,395			36,829			3,083			3,294
Long-term debt		133,350			129,911			131,061			134,350
Other liabilities		3,873			4,521			3,052			3,295
Stockholders’ equity
Common stock		215			213			53			53
Additional paid-in capital		51,681			50,600			48,292			51,951
Retained earnings		119,508			112,137			45,283			45,645
Treasury stock		(25,338	)		(13,874	)		(28,395	)		(32,552	)

Total stockholders’ equity		146,066			149,076			65,233			65,097

	$	339,815		$	337,644		$	216,847		$	221,460

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS


	Three Months Ended					Nine Months Ended
	September 30,					September 30,					Three Months Ended
	2008			2007		2008			2007		March 31,
	(Unaudited)										2009			2008
	(In thousands, except per share data)										(Unaudited)
											(In thousands, except per share data)
Net operating revenue	$	36,192		$	36,218	$	105,066		$	106,522	$	26,124		$	31,532
Station operating expenses		26,588			25,975		79,255			78,986		23,940			25,421
Corporate general and administrative		2,485			2,272		7,611			7,194		2,067			2,552
Gain on asset exchange		(282	)		—		(506	)		—

Operating income		7,401			7,971		18,706			20,342		117			3,559
Other expenses, net:
Interest expense		1,889			2,283		5,760			6,861		773			1,995
Other expense, net		—			60		27			142
Other (income) expense, net												(4	)		20

Income before income tax		5,512			5,628		12,919			13,339
Income tax provision		2,415			2,307		5,452			5,468
Income (loss) before income tax												(652	)		1,544
Income tax provision (benefit)												(290	)		634

Net income	$	3,097		$	3,321	$	7,467		$	7,871
Net income (loss)											$	(362	)	$	910

Earnings per share
Earnings (loss) per share
Basic	$	.16		$	.17	$	.38		$	.39	$	(.09	)	$	.18

Diluted	$	.16		$	.17	$	.38		$	.39	$	(.09	)	$	.18

Weighted average common shares		18,940			20,112		19,593			20,082		4,161			5,020

Weighted average common and common equivalent shares		18,952			20,126		19,607			20,111		4,161			5,022

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended
	September 30,						Three Months Ended
	2008			2007			March 31,
	(Unaudited)						2009			2008
	(In thousands)						(Unaudited)
							(In thousands)
Cash flows from operating activities:
Cash provided by operating activities	$	18,185		$	16,955		$	5,053		$	4,042
Cash flows from investing activities:
Acquisition of property and equipment		(5,134	)		(6,180	)		(1,065	)		(2,046	)
Increase in intangibles and other assets		(112	)		(542	)
Acquisition of stations		(10,944	)		(6,761	)		—			(10,729	)
Other investing activities		11			27			27			33

Net cash used in investing activities		(16,179	)		(13,456	)		(1,038	)		(12,742	)
Cash flows from financing activities:
Payments on long-term debt								(2,000	)		(1,000	)
Proceeds from long-term debt		5,500			—			—			5,500
Payments on long-term debt		(1,000	)		(4,000	)
Payments for debt issuance costs								(967	)		—
Purchase of shares held in treasury		(11,810	)		(126	)		(20	)		(1,399	)
Other financing activities		(42	)		190			—			(42	)

Net cash used in financing activities		(7,352	)		(3,936	)
Net cash (used in) provided by financing activities								(2,987	)		3,059

Net decrease in cash and cash equivalents		(5,346	)		(437	)
Net increase (decrease) in cash and cash equivalents								1,028			(5,641	)
Cash and cash equivalents, beginning of period		13,343			10,799			6,992			13,343

Cash and cash equivalents, end of period	$	7,997		$	10,362		$	8,020		$	7,702

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for annual financial statements.

In our opinion, the accompanying financial statements include all adjustments of a normal, recurring nature considered necessary for a fair presentation of our financial position as of ~~September 30, 2008~~March 31, 2009 and the results of operations for the three ~~and nine~~ months ended ~~September 30, 2008~~March 31, 2009 and ~~2007.~~2008. Results of operations for the ~~nine~~three months ended ~~September 30, 2008~~March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2008.~~2009.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Saga Communications, Inc. Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008.

Earnings Per Share Information and Reverse Stock Split

On January 27, 2009 the Company declared a one-for-four reverse stock split of its Class A and Class B Common Stock, effective January 28, 2009. The reverse stock split reduced the Company’s issued and outstanding shares of common stock from approximately 14,425,104 shares of Class A Common Stock and 2,402,338 shares of Class B Common Stock to approximately 3,606,932 and 600,585 shares, respectively.

All 2008 share and per share information in the accompanying financial statements has been restated retroactively to reflect the reverse stock split. The common stock and additional paid-in capital accounts at December 31, 2008 reflect the retroactive capitalization of the 2009 reverse stock split.

Approximately 3,500 incremental shares were not included in the diluted loss per share calculation for the three months ended March 31, 2009 as the shares were antidilutive since the Company reported a net loss for the quarter.

The number of stock options outstanding that had an antidilutive effect on our earnings per share calculation was 450,000 and 670,000 for the three months ended March 31, 2009 and 2008, respectively. The actual effect of these shares, if any, on the diluted earnings per share calculation will vary significantly depending on the fluctuation in the stock price.

Change in Accounting Estimate

In the second quarter of 2008, the Company reviewed the estimated useful lives of its television analog equipment. This review was performed because of the Federal Communications Commission’s (“FCC”) mandatory requirement that all television stations convert from analog to digital spectrum by February 2009. As a result of this review, the Company’s depreciation rate of its analog equipment was increased to reflect the estimated period during which these assets will remain in service. In accordance with FASB 154,“Accounting Changes and Error Corrections,”this change of estimated useful lives is deemed as a change in accounting estimate and has been accounted for prospectively, effective April 1, 2008. The effect of this change in estimate was to decrease net income approximately ~~$122,000 and $237,000, respectively,~~$201,000, and decrease basic and diluted earnings per share by ~~$.01~~$.05 for the three ~~and nine~~ months ended ~~September 30, 2008.~~March 31, 2009.

~~Income Taxes~~SAGA COMMUNICATIONS, INC.

~~Our effective tax rate is higher than the federal statutory rate as a result of certain non-deductible depreciation and amortization expenses and the inclusion of state taxes in the income tax amount.~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

Revenue Recognition

Revenue from the sale of commercial broadcast time to advertisers is recognized when commercials are broadcast. Revenue is reported net of advertising agency commissions. Agency commissions, when applicable, are based on a stated percentage applied to gross billing. All revenue is recognized in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Topic 13,“Revenue Recognition Revised and Updated.”

Income Taxes

Our effective tax rate is higher than the federal statutory rate as a result of the inclusion of state taxes in the income tax amount.

Time Brokerage Agreements

We have entered into Time Brokerage Agreements (“TBAs”) or Local Marketing Agreements (“LMA’s”) in certain markets. In a typical TBA/LMA, the FCC licensee of a station makes available, for a fee, blocks of air time on its station to another party that supplies programming to be broadcast during that air time and sells their own commercial advertising announcements during the time periods specified. We account for TBA’s/LMA’s under Statement of Financial Accounting Standards (“SFAS”) No. 13,“Accounting for Leases”and related interpretations. Revenue and expenses related to TBA’s/LMA’s are included in the accompanying unaudited Condensed Consolidated Statements of ~~Income.~~

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~Operations.

Nonmonetary Asset Exchanges

In 2006, the FCC granted to Sprint Nextel Corporation (“Nextel”) the right to reclaim from broadcasters in each market across the country the 1.9 GHz spectrum to use for an emergency communications system. In order to reclaim this signal, Nextel must replace all analog equipment currently using this spectrum with digital equipment. All broadcasters have agreed to use the digital substitute that Nextel will provide. The exchange of equipment will be completed on a market by market basis. As the equipment is exchanged and put into service in each of our markets we have and expect to continue to record gains to the extent that the fair market value of the equipment we receive exceeds the book value of the analog equipment we exchange. ~~See Note 8, Gain on Asset Exchange.~~There were no asset exchanges during the three months ended March 31, 2009 or 2008.

2. Recent Accounting Pronouncements

In April 2008, the Financial Accounting Standards Board (“FASB”) issued FSP FAS 142-3, "Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). The FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under other accounting principles generally accepted in the United States of America. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. Certain disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We adopted FSP FAS 142-3 effective January 1, 2009, which did not have a material impact on our consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 141(R), ““Business ~~Combinations”~~Combinations(“” (“SFAS 141R”), which changes the principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effect of the business combination. We adopted SFAS 141R is effective ~~prospectively for fiscal years beginning after December 15, 2008 (as of~~ January 1, 2009, ~~for the Company). SFAS 141R will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time.~~

~~In December 2007, the FASB issued SFAS No. 160,~~~~“Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 151”~~(“SFAS 160”), which establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 (as of January 1, 2009 for the Company). We do not currently expect the adoption of SFAS 160 to have a material impact on our consolidated financial position, results of operations and cash flows.

~~In February 2007, the FASB issued SFAS No. 159,~~~~“The Fair Value Option for Financial Assets and Financial Liabilities”~~(“SFAS 159”), which allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The provisions of SFAS 159 were effective as of January 1, 2008. We did not elect the fair value option under this standard upon adoption.

~~In September 2006, the FASB issued SFAS No. 157,~~~~“Fair Value Measurements”~~(“SFAS 157”) which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Companies were required to apply the recognition and disclosure provision of SFAS 157 for financial assets and financial liabilities effective January 1, 2008. In February 2008, the FASB issued FSP FAS 157-2 that delayed by one year, the effective date of SFAS 157 for the majority of nonfinancial assets and nonfinancial liabilities. We adopted the provisions of SFAS 157 effective January 1, 2008 for certain assets which were not included in FSP FAS 157-2, which did not have a material impact or effect on our consolidated financial position, results of operations and cash flows. We do not expect the adoption of the deferred portion of SFAS 157 to have a material impact on our consolidated financial position, results of operations and cash flows.

~~In September 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-4,~~~~“Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”~~(“EITF No. 06-4”). EITF No. 06-4 requires that for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods, an employer should recognize a liability for future benefits in accordance with SFAS No. 106 (if, in substance, a postretirement benefit plan exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in substance, an individual deferred compensation contract) based on the substantive agreement with the employee. We adopted EITF No. 06-4 effective January 1, 2008, which did not have a material impact or effect on our consolidated financial position, results of operations and cash flows.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

On January 1, 2009, we adopted the provisions of SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), related to nonfinancial assets and liabilities on a prospective basis. SFAS 157 establishes the authoritative definition of fair value, sets out a framework for measuring fair value and expands the required disclosures about fair value measurement. On January 1, 2008, we adopted the provisions of SFAS 157 related to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring basis. The adoption of the provisions of SFAS 157 did not have a material impact on our consolidated financial position, results of operations and cash flows.

3. Intangible Assets and Goodwill

Under SFAS No. 142,“Accounting for Goodwill and Other Intangible Assets,”(“SFAS 142”) goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to impairment tests which are conducted annually, or more ~~frequent~~frequently if impairment indicators arise.

We consider FCC broadcast licenses to have indefinite lives. Factors that we considered in evaluating that the radio and television FCC licenses are indefinite-lived intangible assets under SFAS 142 include the following:

	•		The radio and television broadcasting licenses may be renewed indefinitely at little cost.

	•		The radio and television broadcasting licenses are essential to our business, and we intend to renew our licenses indefinitely.

	•		We have never been denied the renewal of a FCC broadcast license.

	•		We do not believe that there will be any compelling challenge to the renewal of our broadcast licenses.

	•		We do not believe that the technology used in broadcasting will be replaced by another technology in the foreseeable future.

Based on the above, we believe cash flows from our radio and television licenses are expected to continue indefinitely. If actual market conditions are less favorable than those estimated by the Company or if economic conditions continue to deteriorate, the fair value of the Company’s broadcast licenses could decline and the Company may be required to recognize impairment charges in future periods. Such a charge could have a material effect on the consolidated financial statements.

Separate intangible assets that have finite lives are amortized over their useful lives using the straight-line method. Favorable lease agreements are amortized over the lives of the leases. Other intangibles are amortized over one to eleven years.

4. Common Stock and Treasury Stock

The following summarizes information relating to the number of shares of our common stock issued in connection with stock transactions through ~~September 30, 2008:~~March 31, 2009:


	Common Stock Issued						Common Stock Issued
	Class A			Class B			Class A			Class B
	(Shares in thousands)						(Shares in thousands)
Balance, January 1, 2007		18,892			2,396
Balance, January 1, 2008								4,744			598
Exercised options		43			—			5			—
Conversion of shares		8			(8	)		1			(1	)
Issuance of restricted stock		36			5			23			3
Forfeiture of restricted stock		(2	)		—			(3	)		—

Balance, December 31, 2007		18,977			2,393
Exercised options		19			—
Balance, December 31, 2008								4,770			600
Conversion of shares		3			(3	)		1			(1	)
Issuance of restricted stock		93			12
Forfeiture of restricted stock		(12	)		—			(1	)		—

Balance, September 30, 2008		19,080			2,402
Balance, March 31, 2009								4,770			599

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

5. Acquisitions

~~We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties.~~ The unaudited condensed consolidated statements of ~~income~~operations 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 costs were 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, which is deductible for tax purposes.

2008 Acquisitions

On September 5, 2008, in connection with a city of license change for WJZK(FM), we exchanged ~~$205,000~~$242,000 in cash and a tower, antenna, and transmitter with a fair market value (which approximates cost) of approximately $1,591,000, with another radio ~~station.~~station for a broadcast license.

On January 21, 2004, we entered into agreements to acquire an FM radio station (WOXL-FM) serving the Asheville, North Carolina market. On November 1, 2002 we began providing programming under a Sub-Time Brokerage Agreement to WOXL-FM, and on January 31, 2008 we closed on the acquisition for approximately $9,463,000 of which approximately $9,354,000 was paid in 2008 and $109,000 was paid in prior years. Since WOXL was operated under a TBA and we recognized the related interest expense, there is no pro forma effect of this acquisition.

On January 31, 2008, we paid $1,350,000 in connection with the 2006 acquisition of one FM radio station (WTMT-FM) serving the Tazewell, Tennessee market for approximately $4,186,000, we paid the seller $1,350,000, which had been recorded as a note payable at December 31, 2007. We relocated the tower to Weaverville, North Carolina (serving the Asheville, North Carolina market) and started broadcasting in Asheville on June 8, 2007.

~~2007 Acquisitions~~

~~On November 1, 2007, we acquired an FM radio station (WCLZ-FM) serving the Portland, Maine market for approximately $3,555,000.~~

On August 31, 2007, we acquired two radio stations (WKRT-AM and WIII-FM licensed to Cortland, New York, and an FM translator station that rebroadcasts WIII) serving the Ithaca, New York market for approximately $3,843,000. Due to FCC ownership rules we were not permitted to own WKRT-AM and as part of the transaction we donated WKRT-AM to a non-profit organization.

On January 2, 2007 we acquired one FM radio station (WCNR-FM) serving the Charlottesville, Virginia market for $3,330,000. On September 1, 2006 we began providing programming under an LMA to WCNR-FM. We funded this acquisition on December 31, 2006.

On January 16, 2007, we agreed to pay $50,000 to cancel a clause in our 2003 purchase agreement of WSNI-FM in the Winchendon, Massachusetts market that would have required us to pay the seller an additional $500,000 if within five years of closing we obtained approval from the FCC for a city of license change.

On January 2, 2007, in connection with the 2003 acquisition of one FM radio station (WJZA-FM) serving the Columbus, Ohio market, we paid an additional $850,000 to the seller upon obtaining approval from the FCC for a city of license change.

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~

~~Condensed Consolidated Balance Sheet of 2008 and 2007 Acquisitions~~

The following unaudited condensed consolidated balance sheets represent the estimated fair value assigned to the related assets and liabilities of the 2008 and 2007 acquisitions at their respective acquisition dates. We paid approximately $10,944,000, $6,761,000 and $10,298,000 in connection with acquisitions during the nine months ended September 30, 2008 and 2007 and the year ended December 31, 2007, respectively.

~~Saga Communications, Inc.~~

~~Condensed Consolidated Balance Sheet of 2008 and 2007 Acquisitions~~

Acquisitions in
2008 2007
(In thousands)
Assets Acquired:

Current assets $ — $ 130
Property and equipment 56 931
Other assets:
Broadcast licenses-Radio segment 5,658 12,210
Goodwill-Radio segment 5,314 834
Other intangibles, deferred costs and investments — 46

Total other assets 10,972 13,090

Total assets acquired 11,028 14,151

Liabilities Assumed:

Current liabilities 84 3,853

Total liabilities assumed 84 3,853

Net assets acquired $ 10,944 $ 10,298

~~Pro Forma Results of Operations for Acquisitions and Dispositions (Unaudited)~~

The following unaudited pro forma results of our operations for the nine months ended September 30, 2008 and 2007 assume the 2008 and 2007 acquisitions occurred as of January 1, 2007. 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,
2008 2007 2008 2007
(In thousands, except per share data)
Consolidated Results of Operations

Net operating revenue $ 36,192 $ 36,500 $ 105,066 $ 107,445
Station operating expense 26,588 26,239 79,255 79,807
Corporate general and administrative 2,485 2,272 7,611 7,194
Gain on asset exchange (282 ) — (506 ) —

Operating income 7,401 7,989 18,706 20,444
Interest expense 1,889 2,283 5,760 6,861
Other expense, net — 60 27 142
Income taxes 2,415 2,315 5,452 5,510

Net income $ 3,097 $ 3,331 $ 7,467 $ 7,931

Basic earnings per share $ .16 $ .17 $ .38 $ .39

Diluted earnings per share $ .16 $ .17 $ .38 $ .39

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(In thousands)
Radio Broadcasting Segment

Net operating revenue $ 31,306 $ 32,186 $ 91,316 $ 94,563
Station operating expense 22,717 22,756 68,028 69,281

Operating income $ 8,589 $ 9,430 $ 23,288 $ 25,282

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(In thousands)
Television Broadcasting Segment

Net operating revenue $ 4,886 $ 4,314 $ 13,750 $ 12,882
Station operating expense 3,871 3,483 11,227 10,526
Gain on asset exchange (282 ) — (506 ) —

Operating income $ 1,297 $ 831 $ 3,029 $ 2,356

~~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, 2008:

Net operating revenue $ 31,306 $ 4,886 $ — $ 36,192
Station operating expense 22,717 3,871 — 26,588
Corporate general and administrative — — 2,485 2,485
Gain on asset exchange — (282 ) — (282 )

Operating income (loss) $ 8,589 $ 1,297 $ (2,485 ) $ 7,401

Corporate
Radio Television and Other Consolidated
(In thousands)
Three Months Ended September 30, 2007:

Net operating revenue $ 32,186 $ 4,314 $ — $ 36,500
Station operating expense 22,756 3,483 — 26,239
Corporate general and administrative — — 2,272 2,272

Operating income (loss) $ 9,430 $ 831 $ (2,272 ) $ 7,989

Corporate
Radio Television and Other Consolidated
(In thousands)
Nine Months Ended September 30, 2008:

Net operating revenue $ 91,316 $ 13,750 $ — $ 105,066
Station operating expense 68,028 11,227 — 79,255
Corporate general and administrative — — 7,611 7,611
Gain on asset exchange — (506 ) — (506 )

Operating income (loss) $ 23,288 $ 3,029 $ (7,611 ) $ 18,706

Corporate
Radio Television and Other Consolidated
(In thousands)
Nine Months Ended September 30, 2007:

Net operating revenue $ 94,563 $ 12,882 $ — $ 107,445
Station operating expense 69,281 10,526 — 79,807
Corporate general and administrative — — 7,194 7,194

Operating income (loss) $ 25,282 $ 2,356 $ (7,194 ) $ 20,444

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~market.

6. ~~Stock Based~~Stock-Based Compensation

~~The Company accounts for stock-based awards under the provisions of SFAS No. 123R,~~~~“Share-Based Payment”~~(“SFAS 123R”). Compensation expense of approximately $202,000 and $698,000, respectively, and related tax benefits of $85,000 and $294,000, respectively, was recognized for the three and nine months ended September 30, 2008. For the three and nine months ended September 30, 2007, the Company recognized compensation expense of approximately $259,000 and $684,000, respectively, and related tax benefits of $106,000 and $280,000, respectively. Compensation expense is reported in corporate general and administrative expenses in our results of operations.

~~Employee Stock Purchase Plan~~

We have an employee stock purchase plan (ESPP) for all eligible employees. Each quarter, an eligible employee may elect to withhold up to 10 percent of his or her compensation, up to a maximum of $5,000, to purchase shares of our stock at a price equal to 85% of the fair value of the stock as of the last day of such quarter. The ESPP will terminate on December 31, 2008. Approximately 19,387 and 15,425 shares were purchased under the ESPP during the nine months ended September 30, 2008 and 2007, respectively. Our ESPP is deemed compensatory under the provisions of FAS 123R.

2005 Incentive Compensation Plan

~~The~~On May 9, 2005, our stockholders approved the 2005 Incentive Compensation Plan (the “2005 Plan”) which replaced our 2003 Stock Option Plan (the “2003 Plan”) as to future grants. The 2005 Plan extends through March 2015 and allows for the granting of restricted stock, restricted stock units, incentive stock options, nonqualified stock options, and performance awards to officers and a selected number of employees.

~~2003 Stock Option Plan~~Stock-Based Compensation

We adopted the 2003 Plan, upon expiration of our 1992 Stock Option Plan (the “1992 Plan”) in December 2002, pursuant to which our key employees, including directors who are employees, were eligible to receive grants of options to purchase our Class A Common Stock or Class B Common Stock. With the approval of the 2005 Plan, the 2003 Plan was terminated as to future grants, therefore the shares availableThe Company accounts for ~~future grants~~stock-based awards under the ~~2003 Plan are no longer available.~~provisions of SFAS No. 123R,“Share-Based Payment”(“SFAS 123R”). Compensation expense of approximately $202,000 and $253,000 was recognized for the three months ended March 31, 2009 and 2008, respectively, and is included in corporate general and administrative expenses in our results of operations. The associated future income tax benefit recognized for the three months ended March 31, 2009 and 2008 was approximately $90,000 and $104,000, respectively.

The following summarizes the stock option transactions for the 2005 and 2003 Plans and the 1992 ~~Plans~~Stock Option Plan (the “1992 Plan”) for the ~~nine~~three months ended ~~September 30, 2008:~~March 31, 2009:


						Weighted Average									Weighted Average
						Remaining		Aggregate							Remaining		Aggregate
	Number of			Weighted Average		Contractual Term		Intrinsic		Number of			Weighted Average		Contractual Term		Intrinsic
	Options			Exercise Price		(Years)		Value		Options			Exercise Price		(Years)		Value
Outstanding at December 31, 2007		2,682,752		$	12.81		4.4	$	—
Outstanding at January 1, 2009											450,059		$	54.11		4.7	$	—
Granted		—			—						—			—
Exercised		—			—						—			—
Expired		(714,568	)		10.58						—			—
Forfeited		(44,790	)		10.29						(2,516	)		40.92

Outstanding at September 30, 2008		1,923,394		$	13.70		4.7	$	—
Outstanding at March 31, 2009											447,543		$	54.18		4.4	$	—

Exercisable at September 30, 2008		1,418,266		$	14.97		3.6	$	—
Exercisable at March 31, 2009											366,013		$	57.43		3.8	$	—

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

The following summarizes the non-vested stock option transactions for the 2005, 2003 and 1992 Plans for the ~~nine~~three months ended ~~September 30, 2008:~~March 31, 2009:

Weighted Average
Number of Grant Date Fair
Options Value
Non-vested at December 31, 2007 738,263 $ 5.09
Granted — —
Vested (188,345 ) 5.23
Forfeited/canceled (44,790 ) 5.11

Non-vested at September 30, 2008 505,128 $ 5.03

~~We calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for each respective period:~~

2007 2006
Grants Grants
Weighted average grant date fair value per share $ 4.82 $ 4.49
Expected volatility 36.50 % 37.19 %
Expected term of options (years) 7.9 7.8
Risk-free interest rate 4.76 % 4.27 %
Dividend yield 0 % 0 %

The estimated expected volatility, expected term of options and estimated annual forfeiture rate was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.


				Weighted Average
	Number of			Grant Date Fair
	Options			Value
Non-vested at January 1, 2009		126,325		$	20.13
Granted		—			—
Vested		(42,279	)		20.87
Forfeited/canceled		(2,516	)		20.27

Non-vested at March 31, 2009		81,530		$	19.74

The following summarizes the restricted stock transactions for the ~~nine~~three months ended ~~September 30, 2008:~~March 31, 2009:


				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value
Outstanding at December 31, 2007		164,072		$	10.24
Outstanding at January 1, 2009							53,649		$	32.60
Granted		105,300			5.99		—			—
Vested		(41,843	)		10.55		(14,356	)		35.82
Forfeited		(12,957	)		9.29		(1,185	)		31.98

Non-vested and outstanding at September 30, 2008		214,572		$	8.15
Non-vested and outstanding at March 31, 2009							38,108		$	31.40

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

8. ~~Gain on Asset Exchange~~

In 2006, the FCC granted to Nextel the right to reclaim from broadcasters in each market across the country the 1.9 GHz spectrum to use for an emergency communications system. In order to reclaim this signal, Nextel must replace all analog equipment currently using this spectrum with digital equipment. We have agreed to accept the substitute equipment that Nextel will provide and in turn we must relinquish our existing equipment to Nextel. This arrangement is accounted for as an exchange of assets in accordance with Accounting Principles Board No. 29,~~“Accounting for Nonmonetary Transactions,”~~~~as amended by SFAS No. 153,~~~~“Exchanges of Nonmonetary Assets.”~~

The equipment we receive under this arrangement is recorded at its estimated fair market value and depreciated over estimated useful lives ranging from 5 to 15 years. Fair market value is derived from quoted prices obtained from manufacturers and vendors for the specific equipment acquired. As the equipment is exchanged and put into service in each of our markets we have and expect to continue to record gains to the extent that the fair market value of the equipment we receive exceeds the book value of the analog equipment we exchange. For the three and nine months ended September 30, 2008, we recognized gains of approximately $282,000 and $506,000, respectively, from the exchange of this equipment.

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~

9. Segment Information

We evaluate the operating performance of our markets individually. For purposes of business segment reporting, we have aligned operations with similar characteristics into two business segments: Radio and Television.

The Radio segment includes twenty-three markets, which includes all ninety-one of our radio stations and five radio information networks. The Television segment includes three markets and consists of five television stations and four low power television (“LPTV”) stations. The Radio and Television segments derive their revenue from the sale of commercial broadcast inventory. The category “Corporate general and administrative” represents the income and expense not allocated to reportable segments.


						Corporate											Corporate
	Radio		Television			and Other			Consolidated			Radio		Television			and Other			Consolidated
	(In thousands)											(In thousands)
Three Months Ended September 30, 2008:
Three Months Ended March 31, 2009:
Net operating revenue	$	31,306	$	4,886		$	—		$	36,192		$	22,697	$	3,427		$	—		$	26,124
Station operating expense		22,717		3,871			—			26,588			20,317		3,623			—			23,940
Corporate general and administrative		—		—			2,485			2,485			—		—			2,067			2,067
Gain on asset exchange		—		(282	)		—			(282	)

Operating income (loss)	$	8,589	$	1,297		$	(2,485	)	$	7,401		$	2,380	$	(196	)	$	(2,067	)	$	117

Depreciation and amortization	$	1,618	$	620		$	54		$	2,292		$	1,531	$	666		$	61		$	2,258

Total assets												$	172,280	$	29,587		$	14,980		$	216,847

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere herein and the audited financial statements and Management Discussion and Analysis contained in our Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008. The following discussion is presented on both a consolidated and segment basis. Corporate general and administrative expenses, interest expense, other (income) expense, and income tax expense (benefit) are managed on a consolidated basis and are ~~therefore,~~ reflected only in our discussion of consolidated results.

Our discussion of the results of operations of our operating segments focuses on their operating income because we manage our operating segments primarily on their operating income. We evaluate the operating performance of our markets individually. For purposes of business segment reporting, we have aligned operations with similar characteristics into two business segments: Radio and Television. The Radio segment includes twenty-three markets, which includes all ninety-one of our radio stations and five radio information networks. The Television segment includes three markets and consists of five television stations and four LPTV stations.

General

We are a broadcast company primarily engaged in ~~acquiring,~~ developing and operating radio and television stations. ~~We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. We review acquisition opportunities on an ongoing basis.~~

~~For additional information with respect to acquisitions, see “Liquidity and Capital Resources” below.~~

Radio Segment

Our radio segment’s primary source of revenue is from the sale of advertising for broadcast on our stations. Depending on the format of a particular radio station, there are a predetermined number of advertisements available to be broadcast each hour.

Most advertising contracts are short-term, and generally run only for a few weeks. The majority of our revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff. For the ~~nine~~three months ended ~~September 30,~~March 31, 2009 and 2008, approximately 88% and ~~2007, approximately~~ 86%, respectively, of our radio segment’s gross revenue was from local advertising. To generate national advertising sales, we engage an independent advertising sales representative ~~firm~~firms that ~~specializes~~specialize in national sales for each of our broadcast markets.

Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. The downturn in the U.S. economy has had a significant adverse effect on our revenue for the first quarter of 2009, and our revenue for the first half of 2009 is continuing to trend downward.

In 2008 we had a considerable increase in revenue due to political advertising. Since 2009 is not an election year, we expect political revenue to significantly decline in 2009.

Our net operating revenue, station operating expense and operating income varies from market to market based upon the market’s rank or size which is based upon population and the available radio advertising revenue in that particular market.

Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers. In a number of our markets this is measured by periodic reports generated by independent national rating services. In the remainder of our markets it is measured by the results advertisers obtain through the actual running of an advertising schedule. Advertisers measure these results based on increased demand for their goods or services and/or actual revenues generated from such demand. Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media and signal strength. Because reaching a large and demographically attractive audience is crucial to a station’s financial success, we endeavor to develop strong listener loyalty.

1713

When we acquire and/or begin to operate a station or group of stations we generally increase programming and advertising and promotion expenses to increase our share of our target demographic audience. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years. During periods of economic downturns, or when the level of advertising spending is flat or down across the industry, this strategy may result in the appearance that our cost of operations are increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired station or group of stations.

The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by the format of a particular radio station. Our stations strive to maximize revenue by constantly managing the number of commercials available for sale and adjusting prices based upon local market conditions and ratings. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of inventory sell out ratios and pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Our radio stations employ a variety of programming formats. We periodically perform market research, including music evaluations, focus groups and strategic vulnerability studies. Our stations also employ audience promotions to further develop and secure a loyal following. We believe that the diversification of formats on our radio stations helps to insulate us from the effects of changes in musical tastes of the public on any particular format.

The primary operating expenses involved in owning and operating radio stations are employee salaries including commissions, depreciation, programming expenses, and advertising and promotion expenses.

Similar to the fluctuations in the current general economic climate, radio revenue growth has been declining or stagnant over the last several years primarily in major markets that are dependent on national advertising. We believe that this decline in major market radio advertising revenue is the result of a lack of pricing discipline by radio operators and new technologies and media (such as the Internet, satellite radio, and MP3 players). These new technologies and media are gaining advertising share against radio and other traditional media. Conversely, radio revenue in the small to mid markets had been trending upward in recent months, however revenue for the fourth quarter 2008 and first quarter 2009 is currently trending significantly down due to the significant slowdown in the general economy.

We have begun several initiatives to offset the ~~declines.~~declines in revenue. We are continuing to expand our interactive initiative to provide a seamless audio experience across numerous platforms to connect with our listeners where and when they want, and are adding online components including streaming our stations over the Internet and on-demand options. We are seeing development potential in this area and believe that revenues from our interactive initiatives will continue to increase.

We also continue the rollout of HD ~~Radio~~™Radio™. HD Radio utilizes digital technology that provides improved sound quality over standard analog broadcasts and also allows for the delivery of additional channels of diversified programming or data streams in each radio market. It is unclear what impact HD Radio will have on the industry and our revenue as the availability of HD receivers, particularly in automobiles, is not widely available.

In response to the declining trend in revenue caused by the global economic crisis, we have continued to evaluate and reduce operating expenses. We have made reductions in our workforce, implemented a companywide 5% salary decrease, renegotiated and/or eliminated certain contracts, and are continuing to evaluate every area of our operations for additional savings in expenses. Given the current economic environment, we anticipate these reductions to decrease our operating expenses by at least 5%.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2009 and 2008 ~~and 2007~~ and the years ended December 31, ~~2007~~2008 and ~~2006,~~2007, our Columbus, Ohio; Manchester, New Hampshire; Milwaukee, Wisconsin; and Norfolk, Virginia markets, when combined, represented approximately ~~61%~~30%, ~~62%~~32%, ~~60%~~30% and ~~64%~~32%, respectively, of our consolidated net operating ~~income.~~revenue. An adverse change in any of these radio markets or our relative market position in those markets could have a significant impact on our operating results as a whole.

Our net operating revenue, station operating expense and operating income vary from market to market based upon the market’s rank or size, which is based upon population, available television advertising revenue in that particular market, and the popularity of programming being broadcast.

Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by periodic reports by independent national rating services. Various factors affect the ~~rates~~rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming through locally produced news, sports and weather and as a result of syndication and network affiliation agreements, local market competition, the ability of television broadcasting to reach a mass appeal market compared to other advertising media, and signal strength including cable/satellite coverage, and government regulation and policies.

For the period commencing on January 1, 2009, we generally elected “retransmission consent” in notifying the Multichannel Video Programming Distributors (MVPDs) that carry our television programming in our television markets. We have been in negotiations with the MVPDs as to the terms of the carriage of our television stations and the compensation we receive for granting such carriage rights. These negotiations resulted in agreements that will provide approximately $600,000 in revenue in 2009.

When we acquire and/or begin operating a station or group of stations we generally increase programming expenses including local news, sports and weather programming, new syndicated programming, and advertising and promotion expenses to increase our viewership. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years. During periods of economic downturns, or when the level of advertising spending is flat or down across the industry, this strategy may result in the appearance that our cost of operations are increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired/operated station or group of stations.

Our stations strive to maximize revenue by constantly adjusting prices for our commercial spots based upon local market conditions, demand for advertising and ratings. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Because audience ratings in the local market are crucial to a station’s financial success, we endeavor to develop strong viewer loyalty by providing locally produced news, weather and sports programming. We believe that this emphasis on the local market provides us with the viewer loyalty we are trying to achieve.

Most of our revenue is generated from local advertising, which is sold primarily by each television markets’ sales staff. For the ~~nine~~three months ended ~~September 30,~~March 31, 2009 and 2008, approximately 83% and ~~2007, approximately 81% and 80%~~82%, respectively, of our television segment’s gross ~~television~~ revenue was from local advertising. To generate national advertising sales, we engage independent advertising sales representatives that specialize in national sales for each of our television markets.

Our revenue varies throughout the ~~year however, we have had a significant increase in revenue due to political advertising for 2008, which will continue through the fourth quarter 2008.~~year. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. The downturn in the U.S. economy has had a significant adverse effect on our revenue for the first quarter of 2009, and our revenue for the first half of 2009 is continuing to trend downward.

Three Months Ended ~~September 30, 2008~~March 31, 2009 Compared to Three Months Ended ~~September 30, 2007~~March 31, 2008

Results of Operations

The following tables summarize our results of operations for the three months ended ~~September 30, 2008~~March 31, 2009 and ~~2007.~~2008.

Consolidated Results of Operations


	Three Months Ended											Three Months Ended
	September 30,					$ Increase			% Increase			March 31,					$ Increase			% Increase
	2008			2007		(Decrease)			(Decrease)			2009			2008		(Decrease)			(Decrease)
	(In thousands, except percentages and per share information)											(In thousands, except percentages and per share information)
Net operating revenue	$	36,192		$	36,218	$	(26	)		(.1	)%	$	26,124		$	31,532	$	(5,408	)		(17.2	)%
Station operating expense		26,588			25,975		613			2.4	%		23,940			25,421		(1,481	)		(5.8	)%
Corporate G&A		2,485			2,272		213			9.4	%		2,067			2,552		(485	)		(19.0	)%
Gain on asset exchange		(282	)		—		282			N/M

Operating income		7,401			7,971		(570	)		(7.2	)%		117			3,559		(3,442	)		(96.7	)%
Interest expense		1,889			2,283		(394	)		(17.3	)%		773			1,995		(1,222	)		(61.3	)%
Other expense, net		—			60		(60	)		N/M
Other expense (income), net													(4	)		20		(24	)		N/M
Income taxes		2,415			2,307		108			(4.7	)%		(290	)		634		(924	)		(145.7	)%

Net income	$	3,097		$	3,321	$	(224	)		(6.7	)%
Net income (loss)												$	(362	)	$	910	$	(1,272	)		(139.8	)%

Earnings per share (basic and diluted)	$	.16		$	.17	$	(.01	)		(5.9	)%
Earnings (loss) per share (basic and diluted)												$	(.09	)	$	.18	$	(.27	)		(150.0	)%

~~Consolidated~~For the three months ended March 31, 2009, consolidated net operating revenue was ~~relatively unchanged~~$26,124,000 compared with $31,532,000 for the three months ended ~~September 30,~~March 31, 2008, ~~compared with the three months ended September 30, 2007.~~a decline of approximately $5,408,000 or 17%. We had a decrease of approximately ~~$301,000~~$5,592,000 in net operating revenue generated by stations that we owned or operated for the comparable period in ~~2007~~2008 (“same station”), and an increase in net operating revenue of approximately ~~$275,000~~$184,000 attributable to stations we did not own and operate for the entire comparable period. Same station gross national revenue and same station gross local revenue decreased approximately ~~$850,000~~$1,398,000 and ~~$1,200,000, respectively, while same~~$4,408,000, respectively. Same station gross political ~~revenues increased~~revenue decreased approximately ~~$1,700,000.~~$613,000. The decrease in both gross local and national revenue was primarily the result of ~~the significant decline~~revenue downturns in ~~revenue~~all of our ~~radio stations~~markets. The most considerable declines were in ~~the~~our Des Moines, IA (21%), Manchester, NH (37%), Milwaukee, WI (20%), Norfolk, VA (37%), and Victoria, TX (24%) ~~market due to~~markets. Our revenue has been directly affected by the ~~significant decline in radio advertising spending in this market. We do not expect any significant improvements in the Norfolk market in the foreseeable future. We have also experienced~~recent and ongoing economic conditions. There has been an overall decline in advertising revenue as a result of the slowdown in the economy and advertising spending in general. We expect this trend will continue throughout 2009. The ~~increase~~decrease in gross political revenue was directly attributable to advertising in the prior year for the 2008 presidential, congressional, senatorial and local races.

Radio Segment

For the three months ended ~~September 30, 2008,~~March 31, 2009, net operating revenue of the radio segment was ~~$31,306,000~~$22,697,000 compared with ~~$31,904,000~~$27,381,000 for the three months ended ~~September 30, 2007,~~March 31, 2008, which represents a decrease of ~~$598,000~~$4,684,000 or 2%17%. During the current quarter we had an increase in net operating revenue of approximately ~~$275,000~~$184,000 that was attributable to stations we did not own and operate for the entire comparable period. We had a decrease of approximately ~~$873,000~~$4,868,000 in net operating revenue generated by radio stations that we owned or operated for the comparable period in ~~2007~~2008 (“same station”). Same station gross national revenue and same station gross local revenue decreased approximately ~~$1,300,000~~$1,192,000 and ~~$900,000, respectively, while same~~$3,964,000, respectively. Same station gross political ~~revenues increased~~revenue decreased approximately ~~$1,100,000~~$426,000 in the current quarter as compared to the prior year period. The decrease in both gross local and national revenue was primarily the result of ~~the significant decline~~revenue downturns in ~~revenue~~all of our radio ~~stations~~markets. The most considerable declines were in ~~the~~our Des Moines, IA (21%), Manchester, NH (37%), Milwaukee, WI (20%), and Norfolk, VA ~~(20%~~(37%) ~~market due to~~markets. Our revenue has been directly affected by the ~~significant decline in radio advertising spending in this market. We do not expect any significant improvements in the Norfolk market in the foreseeable future. We have also experienced~~recent and ongoing economic conditions. There has been an overall decline in advertising revenue as a result of the slowdown in the economy and advertising spending in general. We expect this trend will continue throughout 2009. The ~~increase~~decrease in gross political revenue was directly attributable to advertising in the prior year for the 2008 presidential, congressional, senatorial and local races.

Station operating expense for the radio segment was ~~$22,717,000~~$20,317,000 for the three months ended ~~September 30, 2008,~~March 31, 2009, compared with ~~$22,492,000~~$21,913,000 for the three months ended ~~September 30, 2007, an increase~~March 31, 2008, a decline of approximately ~~$225,000~~$1,596,000 or 1%7%. ~~Station~~Same station operating expense decreased $1,741,000 from the prior year quarter. The decrease in same station operating expense was a direct result of ~~radio stations that we owned or operated for~~ the ~~comparable period~~decline in ~~2007 (“same station”) was relatively unchanged for~~net operating revenue as well as expense reductions implemented in the ~~three months ended September 30, 2008.~~quarter. During the current quarter we had an increase in station operating expense of approximately ~~$229,000~~$145,000 attributable to stations we did not own and operate for the entire comparable period.

Operating income in the radio segment decreased ~~$823,000~~$3,088,000 or 9%56%, to ~~$8,589,000~~$2,380,000 for the three months ended ~~September 30, 2008~~March 31, 2009, from ~~$9,412,000~~$5,468,000 for the three months ended ~~September 30, 2007.~~March 31, 2008. The decrease was primarily the result of lower same station net operating revenue as described in detail above.

Television Segment

For the three months ended ~~September 30, 2008,~~March 31, 2009, net operating revenue of our television segment was ~~$4,886,000~~$3,427,000 compared with ~~$4,314,000~~$4,151,000 for the three months ended ~~September 30, 2007, an increase~~March 31, 2008, a decrease of ~~$572,000~~$724,000 or ~~13%~~17%. ~~The improvement in net operating~~Gross national revenue ~~was the result of an increase in~~and gross local revenue decreased $206,000 and $444,000, respectively. Gross political revenue ~~of $582,000~~decreased $187,000 in the current quarter as compared to the prior year period. All of our television markets have been directly affected by the recent and ongoing economic conditions. There has been an overall decline in advertising revenue as a result of the slowdown in the economy and advertising spending in general. We expect this trend will continue throughout 2009. The ~~increase~~decrease in gross political revenue was directly attributable to advertising in the prior year for the 2008 presidential, congressional, senatorial and local races.

Station operating expense in the television segment for the three months ended ~~September 30, 2008~~March 31, 2009 was ~~$3,871,000,~~$3,623,000, compared with ~~$3,483,000~~$3,508,000 for the three months ended ~~September 30, 2007,~~March 31, 2008, an increase of approximately ~~$388,000~~$115,000 or ~~11%~~3%. ~~This increase is primarily attributed to~~Station operating expense decreased $156,000 as a result of cost reductions and declines in net operating revenue. However, this decrease was offset by an increase in depreciation expense in the current quarter as a result of a change in the estimated useful life of television analog equipment.

Operating ~~income~~loss in the television segment for the three months ended ~~September 30, 2008~~March 31, 2009 was ~~$1,297,000~~$196,000 compared to ~~$831,000~~operating income of $643,000 for the three months ended ~~September 30, 2007, an increase~~March 31, 2008, a decrease of approximately ~~$466,000 or 56%.~~$839,000. The ~~increase~~decrease was ~~primarily~~ the result of ~~an increase~~the declines in ~~gross political~~net operating revenue ~~offset by~~and an increase in depreciation expense, as discussed above. ~~Also contributing to the increase in operating income for the quarter is a $282,000 gain from the exchange of equipment under an arrangement we have with Sprint Nextel Corporation.~~

2319

~~Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007~~

~~The following tables summarize our results of operations for the nine months ended September 30, 2008 and 2007.~~

~~Consolidated Results of Operations~~

Nine Months Ended
September 30, $ Increase % Increase
2008 2007 (Decrease) (Decrease)
(In thousands, except percentages and per share information)
Net operating revenue $ 105,066 $ 106,522 $ (1,456 ) (1.4 )%
Station operating expense 79,255 78,986 269 0.3 %
Corporate G&A 7,611 7,194 417 5.8 %
Gain on asset exchange (506 ) — 506 N/M

Operating income 18,706 20,342 (1,636 ) (8.0 )%
Interest expense 5,760 6,861 (1,101 ) (16.1 )%
Other expense, net 27 142 (115 ) N/M
Income taxes 5,452 5,468 (16 ) (0.3 )%

Net income $ 7,467 $ 7,871 $ (404 ) (5.1 )%

Earnings per share (basic and diluted) $ .38 $ .39 $ (.01 ) (2.6 )%

~~Radio Broadcasting Segment~~

Nine Months Ended
September 30, $ Increase % Increase
2008 2007 (Decrease) (Decrease)
(In thousands, except percentages)
Net operating revenue $ 91,316 $ 93,640 $ (2,324 ) (2.5 )%
Station operating expense 68,028 68,460 (432 ) (0.6 )%

Operating income $ 23,288 $ 25,180 $ (1,892 ) (7.5 )%

~~Television Broadcasting Segment~~

Nine Months Ended
September 30, $ Increase % Increase
2008 2007 (Decrease) (Decrease)
(In thousands, except percentages)
Net operating revenue $ 13,750 $ 12,882 $ 868 6.7 %
Station operating expense 11,227 10,526 701 6.7 %
Gain on asset exchange (506 ) — 506 N/M

Operating income $ 3,029 $ 2,356 $ 673 28.6 %


~~N/M~~		~~= Not meaningful~~

~~Reconciliation of segment operating income to consolidated operating income:~~

Corporate
Radio Television and Other Consolidated
(In thousands)
Nine Months Ended September 30, 2007:

Net operating revenue $ 93,640 $ 12,882 $ — $ 106,522
Station operating expense 68,460 10,526 — 78,986
Corporate general and administrative — — 7,194 7,194

Operating income (loss) $ 25,180 $ 2,356 $ (7,194 ) $ 20,342

~~Consolidated~~

For the nine months ended September 30, 2008, consolidated net operating revenue was $105,066,000 compared with $106,522,000 for the nine months ended September 30, 2007, a decline of approximately $1,456,000 or 1%. We had a decrease of approximately $2,411,000 in net operating revenue generated by stations that we owned or operated for the comparable period in 2007 (“same station”), and an increase in net operating revenue of approximately $955,000 attributable to stations we did not own and operate for the entire comparable period. Same station gross national revenue and gross local revenue decreased approximately $650,000 and $4,300,000, respectively, in the current year. These decreases were offset by an increase in gross political revenue of approximately $2,300,000. The increase in gross political revenue was directly attributable to advertising for the 2008 presidential, congressional, senatorial and local races. The decrease in local revenue was primarily the result of the significant declines in gross local revenue of our radio stations in the Norfolk (25%) and Columbus (12%) markets. These declines are attributable to the significant declines in radio advertising spending in these specific markets. We do not expect any significant improvements in these markets in the foreseeable future. We have also experienced an overall decline in advertising revenue as a result of the slowdown in the economy and advertising spending in general.

Station operating expense was $79,255,000 for the nine months ended September 30, 2008, compared with $78,986,000 for the nine months ended September 30, 2007, an increase of approximately $269,000 or less than 1%. We had a decrease in station operating expense of approximately $452,000 attributable to stations we owned and operated for the entire comparable period, offset by an increase of approximately $721,000 from those stations that we did not own or operate for the comparable period in 2007. The decrease in same station operating expense was the direct result of the expense reductions in our radio segment we began instituting in 2007 as a result of declines in revenue, particularly in programming and advertising and promotions. We also had a decline in selling and commission expense directly attributable to the decrease in revenue. These decreases were partially offset by an increase in depreciation expense as a result of a change in estimated useful lives of television analog equipment.

Operating income for the nine months ended September 30, 2008 was $18,706,000 compared to $20,342,000 for the nine months ended September 30, 2007, a decrease of approximately $1,636,000, or 8%. The decrease was the result of slightly higher station operating expense and reduced net operating revenue described in detail above, a $417,000 or 6% increase in corporate general and administrative charges partially offset by a $506,000 gain from the exchange of equipment under an arrangement we have with Sprint Nextel Corporation. The increase in corporate general and administrative charges is primarily attributable to an increase in officers’ life insurance expense that is attributable to a decline in the cash surrender value of the life insurance policies, and an increase in expense related to launching our Interactive Media department.

We generated net income of approximately $7,467,000 ($.38 per share on a fully diluted basis) during the nine months ended September 30, 2008, compared with $7,871,000 ($.39 per share on a fully diluted basis) for the nine months ended September 30, 2007, a decrease of approximately $404,000 or 5%. The decrease was primarily the result of lower operating income as discussed above, offset by decreases in interest expense of $1,101,000. The decrease in interest expense was attributable to an average reduction in market interest rates of 1%.

~~Radio Segment~~

For the nine months ended September 30, 2008, net operating revenue of the radio segment was $91,316,000 compared with $93,640,000 for the nine months ended September 30, 2007, a decrease of $2,324,000 or 3%. During 2008 we had an increase in net operating revenue of approximately $955,000 attributable to stations we did not own and operate for the entire comparable period. We had a decrease of approximately $3,279,000 in net operating revenue generated by radio stations that we owned or operated for the comparable period in 2007 (“same station”). The decrease in same station revenue was primarily attributable to same station gross national revenue and same station gross local revenue decreases of approximately $800,000 and $4,200,000, respectively, partially offset by an increase in same station gross political revenue of $1,400,000. The decrease in local revenue was primarily the result of the significant declines in gross local revenue of our radio stations in the Norfolk (25%) and Columbus (12%) markets. These declines are attributable to the significant declines in radio advertising spending in these specific markets. We do not expect any significant improvements in these markets in the foreseeable future. We have also experienced an overall decline in advertising revenue as a result of the slowdown in the economy and advertising spending in general, which we expect to continue into the first quarter of 2009. The increase in gross political revenue was directly attributable to advertising for the 2008 presidential, congressional, senatorial and local races.

Station operating expense for the radio segment was $68,028,000 for the nine months ended September 30, 2008, compared with $68,460,000 for the nine months ended September 30, 2007, a decrease of approximately $432,000 or 1%. The decrease resulted from a decrease of $1,153,000 in same station operating expense, offset by an increase of $721,000 from the operation of radio stations that we did not own or operate for the comparable period in 2007. The decrease in same station radio operating expense was the direct result of the expense reductions in our radio segment we began instituting in 2007 as a result of declines in revenue, particularly in programming and advertising and promotions. We also had a decline in selling and commission expense directly attributable to the decrease in revenue.

Operating income in the radio segment for the nine months ended September 30, 2008 was $23,288,000 compared to $25,180,000 for the nine months ended September 30, 2007, a decrease of approximately $1,892,000 or 8%. The decrease was attributable to lower same station net operating revenue as discussed above.

~~Television Segment~~

For the nine months ended September 30, 2008, net operating revenue of our television segment was $13,750,000 compared with $12,882,000 for the nine months ended September 30, 2007, an increase of $868,000 or 7%. The improvement in net operating revenue was attributable to an increase in gross political revenue of approximately $900,000 as compared to the prior year period. The increase in gross political revenue was directly attributable to advertising for the 2008 presidential, congressional, senatorial and local races.

Station operating expense in the television segment for the nine months ended September 30, 2008 was $11,227,000 compared with $10,526,000 for the nine months ended September 30, 2007, an increase of approximately $701,000 or 7%. This increase is primarily attributed to an increase in depreciation expense as a result of a change in the estimated useful life of television analog equipment.

Operating income in the television segment for the nine months ended September 30, 2008 was $3,029,000 compared to $2,356,000 for the nine months ended September 30, 2007, an increase of approximately $673,000 or 29%. The increase was primarily the result of higher political revenue, offset by an increase in depreciation expense, as discussed above. Also contributing to the increase in operating income for the nine months are gains of $506,000 from the exchange of equipment under an arrangement we have with Sprint Nextel Corporation in our Victoria, TX and Greenville, MS markets. We expect to record additional gains of $300,000 to $400,000 in the third quarter of 2009 as these asset exchanges occur in our Joplin, MO television market.

Forward-Looking Statements

Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “estimates,” “plans”, “expects,” and similar expressions are intended to identify forward-looking statements. These statements are made as of the date of this report or as otherwise indicated, based on current expectations. We undertake no obligation to update this information. A number of important factors could cause our actual results for ~~2008~~2009 and beyond to differ materially from those expressed in any forward-looking statements made by or on our behalf. Forward-looking statements are not guarantees of future performance as they involve a number of risks, uncertainties and assumptions that may prove to be incorrect and that may cause our actual results and experiences to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks, uncertainties and assumptions that may affect our performance include our financial leverage and debt service requirements, dependence on key personnel, dependence on key stations, U.S. and local economic conditions, our ability to successfully integrate acquired stations, regulatory requirements, new technologies, natural disasters and terrorist attacks. We cannot be sure that we will be able to anticipate or respond timely to changes in any of these factors, which could adversely affect the operating results in one or more fiscal quarters. Results of operations in any past period should not be considered, in and of itself, indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of our stock.

For a more complete description of the prominent risks and uncertainties inherent in our business, see “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008.

Liquidity and Capital Resources

Debt Arrangements and Debt Service Requirements

As of ~~September 30, 2008,~~March 31, 2009, we had ~~$134,411,000~~$133,411,000 of long-term debt (including the current portion thereof) outstanding and approximately ~~$47,900,000~~$17,650,000 of unused borrowing capacity under our Credit Agreement.

The Credit Agreement is a ~~$181,250,000~~$150,000,000 reducing revolving line of credit maturing on July 29, 2012. Our indebtedness under the Credit Agreement is secured by a first priority lien on substantially all of our assets and of our subsidiaries, by a pledge of our subsidiaries’ stock and by a guarantee of our subsidiaries.

The Credit Agreement may be used for general corporate purposes, including working capital and capital ~~expenditures, permitted acquisition and related transaction expenses and permitted stock buybacks.~~expenditures.

On ~~each~~March 9, 2009, we amended our Credit Agreement to (i) exclude certain items from the definition of ~~March~~Fixed Charges effective December 31, 2008, ~~June 30,~~(ii) increase the minimum Fixed Charge Coverage ratio effective December 31, 2008, ~~and September 30,~~(iii) increase the maximum Leverage Ratio effective December 31, 2008, (iv) reduce the Revolving Commitments ~~(as defined in~~to $150,000,000, (v) revise the ~~Credit Agreement)~~interest rates and commitment fees and (vi) impose certain other limitations on the Company with respect to restricted payments, acquisitions and stock purchases. In addition, we agreed to pay each lender a fee. The lender fee plus amendment costs were approximately $1 million.

On September 30, 2009, the Revolving Commitments will be permanently reduced by ~~$6,250,000~~$1,250,000 and will continue to be permanently reduced at the end of each calendar quarter thereafter in amounts ranging from ~~3.125%~~4.375% to 12.5% of the original total Revolving Commitments of $200,000,000. In addition, the Revolving Commitments shall be further reduced by specified percentages of Excess Cash Flow (as defined in the Credit Agreement) based on leverage ratios. Any outstanding balance under the Credit Agreement will be due on the maturity date of July 29, 2012.

Sources and Uses of Cash

During the ~~nine~~three months ended ~~September 30,~~March 31, 2009 and 2008, ~~and 2007,~~ we had net cash flows from operating activities of ~~$18,185,000~~$5,053,000 and ~~$16,955,000,~~$4,042,000, respectively. We believe that cash flow from operations will be sufficient to meet quarterly debt service requirements for interest and scheduled payments of principal under the Credit Agreement. However, if such cash flow is not sufficient we may be required to sell additional equity securities, refinance our obligations or dispose of one or more of our properties in order to make such scheduled payments. There can be no assurance that we would be able to effect any such transactions on favorable terms, if at all.

~~The following acquisitions in 2008 were financed through funds generated from operations and additional borrowings of $5,500,000 under our credit agreement:~~

	•		On September 5, 2008, in connection with a city of license change for WJZK(FM), we exchanged $205,000 in cash and a tower, antenna and transmitter with a fair market value (which approximates cost) of approximately $1,591,000, with another radio station.

	•		On January 21, 2004, we entered into agreements to acquire an FM radio station (WOXL-FM) serving the Asheville, North Carolina market. On November 1, 2002 we began providing programming under a Sub-Time Brokerage Agreement to WOXL-FM, and on January 31, 2008 we closed on the acquisition for approximately $9,463,000 of which approximately $9,354,000 was paid in 2008 and $109,000 was paid in prior years.

	•		On January 31, 2008, in connection with the 2006 acquisition of one FM radio station (WTMT-FM) serving the Tazewell, Tennessee market for approximately $4,186,000, we paid the seller $1,350,000, which had been recorded as a note payable at December 31, 2007. We relocated the tower to Weaverville, North Carolina (serving the Asheville, North Carolina market) and started broadcasting in Asheville on June 8, 2007.

~~We continue to actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties.~~

In January 2008, our board of directors authorized an increase to our Stock Buy-Back Program so that we may purchase a total of $60,000,000 of our Class A Common Stock. From the inception of the Stock Buy-Back program in 1998 through ~~September 30, 2008,~~March 31, 2009, we have repurchased ~~3,991,966~~1,382,085 shares of our Class A Common Stock for approximately ~~$38,062,000.~~$45,482,000. Approximately ~~2,085,000~~5,700 shares were ~~repurchased~~retained for payment of withholding taxes related to the vesting of restricted stock during the ~~nine~~three months ended ~~September 30, 2008~~March 31, 2009 for ~~$11,810,000. From October 1, 2008 through November 6, 2008 we have acquired another 1,504,714 shares for $7,364,448.~~

We anticipate that any future acquisitions of radio and television stations and purchases of Class A Common Stock under the Stock Buy-Back Program will be financed through funds generated from operations, borrowings under the Credit Agreement, additional debt or equity financing, or a combination thereof. However, there can be no assurances that any such financing will be available on acceptable terms, if at all.

On October 29, 2008, subsequent to the date of this report, we borrowed an additional $5,000,000 under our credit agreement to fund purchases of our Class A Common Stock under the Stock Buy-Back Program and for general working capital purposes.$20,000.

Our capital expenditures, exclusive of acquisitions, for the ~~nine~~three months ended ~~September 30, 2008~~March 31, 2009 were approximately ~~$5,134,000~~$1,065,000 ($~~6,180,000~~2,046,000 in ~~2007)~~2008). We anticipate capital expenditures in ~~2008~~2009 to be approximately ~~$8,000,000 (reduced for our previous estimate of $9,000,000),~~$3,500,000, which we expect to finance through funds generated from operations or additional borrowings under the Credit Agreement.

Summary Disclosures About Contractual Obligations and Commercial Commitments

We have future cash obligations under various types of contracts under the terms of our Credit Agreement, operating leases, programming contracts, employment agreements, and other operating contracts. For additional information concerning our future cash obligations see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation — Summary Disclosures About Contractual Obligations and Commercial Commitments” in our Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008.

There have been no material changes to such contracts/commitments during the ~~nine~~three months ended ~~September 30, 2008.~~March 31, 2009. On March 9, 2009, we amended our Credit Agreement; however, there were no material changes to our cash obligations. See “Debt Arrangements and Debt Service Requirements” above for additional information regarding the amendment to the Credit Agreement.

We anticipate that ~~the above~~our contractual cash obligations will be financed through funds generated from operations or ~~additional borrowings~~refinance our obligations under the Credit Agreement, or a combination thereof.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates, judgments and assumptions that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures and contingencies. We evaluate estimates used in preparation of our financial statements on a continual basis. There have been no significant changes to our critical accounting policies that are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008.

Inflation

The impact of inflation on our operations has not been significant to date. There can be no assurance that a high rate of inflation in the future would not have an adverse effect on our operations.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

Refer to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk and Risk Management Policies” in our Annual Report on Form 10-K for the year ended December 31, ~~2007~~2008 for a complete discussion of our market risk. There have been no material changes to the market risk information included in our ~~2007~~2008 Annual Report on Form 10-K.

Item 4.Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to cause the material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. There were no changes in the Company’s internal controls over financial reporting during the quarter ended ~~September 30, 2008,~~March 31, 2009, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1.Legal Proceedings

We currently and from time to time are involved in litigation incidental to the conduct of our business. We are not a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on our financial position, cash flows or results of operations.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our repurchases of our Class A Common Stock during the three months ended ~~September 30, 2008.~~March 31, 2009. All shares repurchased during the quarter were ~~repurchased in block purchases and open market transactions on~~from the ~~New York Stock Exchange.~~retention of shares for the payment of withholding taxes related to the vesting of restricted stock.

Total Number of Approximate Dollar
Shares Purchased Value of Shares
Total Number as Part of Publicly that May Yet be
of Shares Average Price Announced Purchased Under the
Period Purchased Paid per Share Program Program(a)
July 1 — July 31, 2008 201,663 $ 5.812 201,663 $ 29,542,700
August 1 — August 31, 2008 1,226,793 $ 5.638 1,226,793 $ 22,625,710
September 1 — September 30, 2008 119,938 $ 5.736 119,938 $ 21,937,759

Total 1,548,394 $ 5.669 1,548,394 $ 21,937,759


					Total Number of		Approximate Dollar
					Shares Purchased		Value of Shares
	Total Number				as Part of Publicly		that May Yet be
	of Shares		Average Price		Announced		Purchased Under the
Period	Purchased		Paid per Share		Program		Program(a)
January 1 — January 31, 2009		—	$	—		—	$	14,538,204
February 1 — February 28, 2009		—	$	—		—	$	14,538,204
March 1 — March 31, 2009		5,682	$	3.50		5,682	$	14,518,317

Total		5,682	$	3.50		5,682	$	14,518,317


(a)		On August 7, 1998 our Board of Directors approved a Stock Buy-Back Program of up to $2,000,000 of our Class A Common Stock. Since August 1998, the Board of Directors has authorized several increases to the Stock Buy-Back Program, the most recent occurring in January 2008, which increased the total amount authorized for repurchase of our Class A Common Stock to $60,000,000.

Item 6.Exhibits

~~4(f)~~

Assignment and Acceptance dated as of September 29, 2008, under the Credit Agreement dated as of July 29, 2003, among the Company, the Lenders party thereto, Union Bank of California, N.A., as Syndication Agent, Bank of America, N.A., as Documentation Agent, and The Bank of New York Mellon, formerly The Bank of New York, as Administrative Agent.

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as ~~amended.~~Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act ~~as amended.~~of 2002.


32			Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13-14(b) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

3022


	SAGA COMMUNICATIONS, INC
Date: ~~November 10, 2008~~May 11, 2009	/s/ SAMUEL D. BUSH
	Samuel D. Bush
	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)


Date: ~~November 10, 2008~~May 11, 2009	/s/ CATHERINE A. BOBINSKI
	Catherine A. Bobinski
	Vice President, Corporate Controller and Chief Accounting Officer ~~(Principal~~ (Principal Accounting Officer)


			Page

PART I.	FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)		3
	Condensed consolidated balance sheets — ~~September 30, 2008~~March 31, 2009 and December 31, ~~2007~~2008		3
	Condensed consolidated statements of ~~income~~operations — Three ~~and nine~~ months ended ~~September 30,~~March 31, 2009 and 2008 ~~and 2007~~		4
	Condensed consolidated statements of cash flows ~~—Nine~~—Three months ended ~~September 30,~~March 31, 2009 and 2008 ~~and 2007~~		5
	Notes to unaudited condensed consolidated financial statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1713
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		2922
Item 4.	Controls and Procedures		2922
PART II	OTHER INFORMATION		3022
Item 1. Legal Proceedings		22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3022
Item 6. Exhibits	~~Exhibits~~		3022
Signatures		23	31
~~EX-4(f) Assignment and Acceptance dated as of September 29, 2008~~
EX-31.1 Section 302 Certification of ~~CEO~~CEO.
EX-31.2 Section 302 Certification of ~~CFO~~CFO.
EX-32 Section 906 Certification of CEO ~~and CFO~~& CFO.


	Acquisitions in
	2008		2007
	(In thousands)
Assets Acquired:
Current assets	$	—	$	130
Property and equipment		56		931
Other assets:
Broadcast licenses-Radio segment		5,658		12,210
Goodwill-Radio segment		5,314		834
Other intangibles, deferred costs and investments		—		46

Total other assets		10,972		13,090

Total assets acquired		11,028		14,151

Liabilities Assumed:
Current liabilities		84		3,853

Total liabilities assumed		84		3,853

Net assets acquired	$	10,944	$	10,298


	2007			2006
	Grants			Grants
Weighted average grant date fair value per share	$	4.82		$	4.49
Expected volatility		36.50	%		37.19	%
Expected term of options (years)		7.9			7.8
Risk-free interest rate		4.76	%		4.27	%
Dividend yield		0	%		0	%


	Percentage of Consolidated						Percentage of Consolidated						Percentage of Consolidated						Percentage of Consolidated
	Operating Income for						Operating Income for						Net Operating Revenue for						Net Operating Revenue
	the Nine Months Ended						the Years Ended						the Three Months Ended						for the Years Ended
	September 30,						December 31,						March 31,						December 31,
	2008			2007			2007			2006			2009			2008			2008			2007
Market:
Columbus, Ohio		6	%		8	%		7	%		10	%		7	%		6	%		6	%		7	%
Manchester, New Hampshire		18	%		14	%		15	%		14	%		5	%		7	%		6	%		6	%
Milwaukee, Wisconsin		35	%		33	%		31	%		30	%		14	%		14	%		14	%		14	%
Norfolk, Virginia		2	%		7	%		7	%		10	%		4	%		5	%		4	%		5	%


*		Operating income (excluding non-cash impairment charge) plus corporate general and administrative expenses, depreciation and amortization.