President's Letter
Annual Report 2008

It is an interesting phenomenon that I have observed in my close to fifty years in broadcasting, and 2008 continued to show, that broadcasting is a barometer of the economy. Perhaps this happens in other industries, but it has not failed to alert us to probable changes in the market place. The difference this time, compared to others, is that we never fully anticipated the tsunami-like effect that occurred. We have faced gale force winds before, but this was, and is, indeed, unusual. As a company, we sensed a slowdown in consumer spending in mid-2008 with a major component of this being a “softening” in the advertising market.

We made subtle adjustments and trimmed our sails so that we could weather this storm. What we didn’t know is that the entire broadcasting armada was about to enter a fiercer tempest than anticipated.

We quickly realized that the operational efficiencies that we made in 2008 weren’t enough to compensate for the loss of revenue that accelerated in the fourth quarter of 2008. We intensified our efforts in 2009 and we have made substantiative reductions in operational and capital expenditures to provide a cushion for your company during this period of disruption.

What we all must remember is that this is a storm...a deceiving storm that has its moments of appearing calm before regaining its destructive power, but, nevertheless, it is a storm. Sooner or later it will blow itself out. “When,” is open to daily debate by much better forecasters than me. I just know and believe, from intuitive and experiential wisdom that, long-term, broadcasting is a secure industry. Let the naysayers have their moment now, but broadcasting, as an industry, will regain momentum and prosper. In truth, radio listening is up in America and, even though industry revenue is down, we are not endangered as are many newspapers. We could well even be strengthened by this change of landscape in the media business.

The difficulty is that, in the interim, we have to keep on weathering this storm and, at the same time, be true to our course and mission.

We have always operated quality broadcast properties. We continue to do so, even though we have asked more of everyone at Saga during this time.

I know that we will navigate this successfully and will not become part of the lost fleet of broadcast companies.

On reflection, while 2008 was not a great year for us at Saga, it wasn’t terrible either. Here is a brief
summary:

Free Cash Flow increased 17.3% to $18.9 million. We decreased capital expenditures from $9.9 in 2007 to $7.1 million in 2008. Station operating expenses (excluding depreciation and amortization) also were reduced $1.3 million from 2007 to 2008. We expect both of these expense areas to be reduced even further in 2009. During the year we used free cash flow to repurchase $19.2 million of our stock.

As I said above, 2009 will be difficult on a business basis. It is more important than ever that we step up to be sensitive, local, and involved in our communities. We are doing that daily. That is our raison d’être. Compelling radio begets listeners. Advertisers can reach those listeners, and those listeners can become consumers of their goods and services. We will never lose sight of this.

Thank you all for your faith in Saga. It will go a long way as we all work through this economic malaise.

Edward K. Christian
Chairman, President/CEO