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

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

Commission file number 1-11588

Saga Communications, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		38-3042953 (I.R.S. Employer Identification No.)
73 Kercheval Avenue Grosse Pointe Farms, Michigan (Address of principal executive offices)		48236 (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. Yes þ No o .

     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). Yes þ No o .

     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 filer o		Accelerated filer þ		Non-accelerated filer o		Smaller Reporting Companyo
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     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 August 4, 2011 was 3,654,488 and 597,859, respectively.

 

 

INDEX

		Page
PART I. FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Condensed consolidated balance sheets — June 30, 2011 and December 31, 2010			3
Condensed consolidated statements of income — Three and six months ended June 30, 2011 and 2010			4
Condensed consolidated statements of cash flows —Six months ended June 30, 2011 and 2010			5
Notes to unaudited condensed consolidated financial statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures about Market Risk			23
Item 4. Controls and Procedures			24
PART II OTHER INFORMATION			24
Item 1. Legal Proceedings			24
Item 6. Exhibits			24
Signatures			25
EX-10(a)
EX-10(p)
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

		June 30,				December 31,
		2011				2010
		(Unaudited)				(Note)
		(In thousands)
Assets
Current assets:
Cash and cash equivalents		$	12,863			$	12,197
Short-term investments			1,014				1,007
Accounts receivable, net			19,830				18,985
Prepaid expenses and other current assets			3,423				2,002
Barter transactions			2,008				1,377
Deferred income taxes			1,008				991
Total current assets			40,146				36,559
Property and equipment			160,856				158,589
Less accumulated depreciation			96,311				93,028
Net property and equipment			64,545				65,561
Other assets:
Broadcast licenses, net			90,584				90,584
Other intangibles, deferred costs and investments, net			6,348				7,099
Total other assets			96,932				97,683
		$	201,623			$	199,803
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	1,779			$	1,683
Payroll and payroll taxes			6,979				5,524
Other accrued expenses			3,750				3,460
Barter transactions			2,113				1,641
Current portion of long-term debt			3,000				6,121
Total current liabilities			17,621				18,429
Deferred income taxes			9,235				7,105
Long-term debt			86,078				89,957
Other liabilities			3,659				4,234
Total liabilities			116,593				119,725
Commitments and contingencies
Stockholders’ equity
Common stock			53				53
Additional paid-in capital			50,535				50,298
Retained earnings			63,032				58,200
Treasury stock			(28,590	)			(28,473	)
Total stockholders’ equity			85,030				80,078
		$	201,623			$	199,803

See notes to unaudited condensed consolidated financial statements.

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
						(Unaudited)
				(In thousands, except per share data)
Net operating revenue		$	33,183			$	32,887			$	61,891			$	60,874
Station operating expense			23,623				23,157				46,359				45,717
Corporate general and administrative			1,949				1,897				3,889				3,779
Operating income			7,611				7,833				11,643				11,378
Other expenses, net:
Interest expense			1,034				1,468				2,191				2,987
Write-off revolving credit facility debt issuance costs			1,326				—				1,326				—
Other (income) expense, net			(95	)			185				(27	)			(3,411	)
Income before income tax			5,346				6,180				8,153				11,802
Income tax provision			2,176				2,485				3,321				4,790
Net income		$	3,170			$	3,695			$	4,832			$	7,012
Earnings per share
Basic		$	.75			$	.87			$	1.14			$	1.66
Diluted		$	.75			$	.87			$	1.14			$	1.66
Weighted average common shares			4,242				4,236				4,237				4,229
Weighted average common and common equivalent shares			4,245				4,237				4,242				4,229

See notes to unaudited condensed consolidated financial statements.

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six Months Ended
		June 30,
		2011				2010
		(Unaudited)
		(In thousands)
Cash flows from operating activities:
Cash provided by operating activities		$	11,556			$	12,826
Cash flows from investing activities:
Acquisition of property and equipment			(2,522	)			(2,146	)
Proceeds from license downgrade			—				3,561
Purchases of short-term investments			—				(2005	)
Other investing activities			(104	)			(7	)
Net cash used in investing activities			(2,626	)			(597	)
Cash flows from financing activities:
Payments on long-term debt			(99,100	)			(7,500	)
Proceeds from long-term debt			92,100				—
Payments for debt issuance costs			(1,147	)			(1,503	)
Purchase of shares held in treasury			(117	)			(78	)
Net cash used in financing activities			(8,264	)			(9,081	)
Net increase in cash and cash equivalents			666				3,148
Cash and cash equivalents, beginning of period			12,197				12,899
Cash and cash equivalents, end of period		$	12,863			$	16,047

See notes to unaudited condensed consolidated financial statements.

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 June 30, 2011 and the results of operations for the three and six months ended June 30, 2011 and 2010. Results of operations for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

     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, 2010.

     The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2011, for items that should potentially be recognized in these financial statements or discussed within the notes to the financial statements.

     Earnings Per Share Information

     The following table sets forth the computation of basic and diluted earnings per share:

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
		(In thousands, except per share data)
Numerator:
Net income available to common stockholders		$	3,170			$	3,695			$	4,832			$	7,012
Denominator:
Denominator for basic earnings per share — weighted average shares			4,242				4,236				4,237				4,229
Effect of dilutive securities			3				1				5				—
Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions			4,245				4,237				4,242				4,229
Basic earnings per share		$	.75			$	.87			$	1.14			$	1.66
Diluted earnings per share		$	.75			$	.87			$	1.14			$	1.66

     The number of stock options outstanding that had an antidilutive effect on our earnings per share calculation, and therefore have been excluded from diluted earnings per share calculation, was 228,000 for the three and six months ended June 30, 2011 and 350,000 for the three and six months ended June 30, 2010. 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.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

     Fair Value of Financial Instruments

     Short-term investments, which include certificates of deposit, approximate fair value due to their short maturities.

     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. Revenue and expenses related to TBA’s/LMA’s are included in the accompanying unaudited Condensed Consolidated Statements of Income.

2. Recent Accounting Pronouncements

     In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2009-13, which addresses the accounting for multiple-deliverable revenue arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit, and provides guidance regarding how to measure and allocate arrangement consideration to one or more units of accounting. This guidance was effective on January 1, 2011 and adoption did not have a material impact on our consolidated financial statements.

     In January 2010, the FASB issued new guidance for fair value measurements and disclosures which requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and 2 fair value measurements and describe the reasons for the transfers. The guidance also requires a reporting entity to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). The guidance was effective on January 1, 2010, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which was effective for the Company on January 1, 2011. The guidance adopted on January 1, 2011 did not have a material impact on our consolidated financial statements.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

3. Intangible Assets

     We evaluate our FCC licenses for impairment annually as of October 1^st or more frequently if events or circumstances indicate that the asset might be impaired. FCC licenses are evaluated for impairment at the market level using a direct method. If the carrying amount of FCC licenses is greater than their estimated fair value in a given market, the carrying amount of FCC licenses in that market is reduced to its estimated fair value.

     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 ranging from 4 to 26 years. 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 June 30, 2011:

		Common Stock Issued
		Class A				Class B
		(Shares in thousands)
Balance, January 1, 2010			4,771				599
Conversion of shares			1				(1	)
Forfeiture of restricted stock			(2	)			—
Balance, December 31, 2010			4,770				598
Conversion of shares			1				(1	)
Balance, June 30, 2011			4,771				597

     We have a Stock Buy-Back Program (the “Buy-Back Program”) to allow us to purchase up to $60,000,000 of our Class A Common Stock. From its inception in 1998 through June 30, 2011, we have repurchased 1,391,586 shares of our Class A Common Stock for approximately $45,680,000.

5. Stock-Based Compensation

     2005 Incentive Compensation Plan

     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.

     Stock-Based Compensation

     Compensation expense of approximately $34,000 and $129,000, respectively, and related tax benefits of $14,000 and $53,000, respectively, was recognized for the three and six months ended June 30, 2011. For the three and six months ended June 30, 2010, the Company recognized compensation expense of approximately $139,000 and $326,000, respectively, and related tax benefits of $56,000 and $132,000, respectively. Compensation expense is reported in corporate general and administrative expenses in our results of operations.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

     The following summarizes the stock option transactions for the 2005 and 2003 Plans and the 1992 Stock Option Plan (the “1992 Plan”) for the six months ended June 30, 2011:

										Weighted Average
										Remaining				Aggregate
		Number of				Weighted Average				Contractual Term				Intrinsic
		Options				Exercise Price				(Years)				Value
Outstanding at January 1, 2011			293,993			$	51.70				3.9			$	—
Granted			—				—
Exercised			—				—
Expired			(65,916	)			58.10
Forfeited			(282	)			37.96
Outstanding at June 30, 2011			227,795			$	49.86				4.1			$	98,468
Exercisable at June 30, 2011			220,785			$	50.24				4.1			$	98,468

     The following summarizes the non-vested stock option transactions for the 2005, 2003 and 1992 Plans for the six months ended June 30, 2011:

						Weighted Average
		Number of				Grant Date Fair
		Options				Value
Non-vested at January 1, 2011			35,155			$	18.51
Granted			—				—
Vested			(27,863	)			18.30
Forfeited/canceled			(282	)			19.30
Non-vested at June 30, 2011			7,010			$	19.30

The following summarizes the restricted stock transactions for the six months ended June 30, 2011:

						Weighted
						Average
						Grant Date
		Shares				Fair Value
Outstanding at January 1, 2011			21,120			$	28.73
Granted			—				—
Vested			(10,632	)			31.28
Forfeited			(463	)			25.87
Non-vested and outstanding at June 30, 2011			10,025			$	26.15

     For the three and six months ended June 30, 2011 and the three and six months ended June 30, 2010, we had approximately $41,000, $108,000, $91,000 and $202,000, respectively, of total compensation expense related to restricted stock-based compensation arrangements. The associated tax benefit recognized for the three and six months ended June 30, 2011 and the three and six months ended June 30, 2010 was approximately $16,000, $44,000, $37,000 and $82,000, respectively.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

6. Long-Term Debt

     Long-term debt consisted of the following:

		June 30,				December 31,
		2011				2010
		(In thousands)
Credit Agreement:
Term loan		$	60,000			$	—
Revolving credit facility			28,000				—
Reducing revolver facility			—				95,000
Secured debt of affiliate			1,078				1,078
			89,078				96,078
Amounts payable within one year			3,000				6,121
		$	86,078			$	89,957

     Future maturities of long-term debt are as follows:

Year Ending December 31,		(In thousands)
2011		$	1,500
2012			3,000
2013			3,000
2014			4,078
2015			3,000
Thereafter			74,500
		$	89,078

     On June 13, 2011, we entered into a new $120 million credit facility (the “Credit Facility”) with a group of banks, to refinance our outstanding debt under the credit agreement in place at March 31, 2011 (the “Old Credit Agreement”). The Credit Facility consists of a $60 million term loan (the “Term Loan”) and a $60 million revolving loan (the “Revolving Credit Facility”) and matures on June 13, 2016.

     We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility.

     We wrote-off unamortized debt issuance costs relating to the Old Credit Agreement of approximately $1.3 million, pre-tax, due to this refinancing during the quarter ended June 30, 2011.

     The proceeds from the Credit Facility were used to refinance our Old Credit Agreement and pay transactional fees. The unused portion of the Revolving Credit Facility is available for general corporate purposes, including working capital, capital expenditures, permitted acquisitions and related transaction expenses and permitted stock buybacks.

     The Term Loan principal amortizes in equal installments of 5% of the Term Loan during each year, however, upon satisfaction of certain conditions, as defined in the Credit Facility, no amortization payment is required. The Credit Facility is also subject to mandatory prepayment requirements, including but not limited to, certain sales of assets, certain insurance proceeds, certain debt issuances and certain sales of equity. Optional prepayments of the Credit Facility are permitted without any premium or penalty, other than certain costs and expenses.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

          Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR plus 1.50% to 2.75% or the base rate plus 0.50% to 1.75%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. We also pay quarterly commitment fees of 0.25% to 0.375% per annum on the unused portion of the Revolving Credit Facility.

     The Credit Facility contains a number of financial covenants (all of which we were in compliance with at June 30, 2011) which, among other things, require us to maintain specified financial ratios and impose certain limitation on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.

     We had approximately $32.0 million of unused borrowing capacity under the Revolving Credit Facility at June 30, 2011.

     Our Old Credit Agreement was a revolving line of credit maturing on July 29, 2012. Our indebtedness under the Old Credit Agreement was 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 Old Credit Agreement was used for general corporate purposes, including working capital and capital expenditures.

     Interest rates under the Old Credit Agreement were payable, at our option, at alternatives equal to LIBOR at the reset date (0.3125% at December 31, 2010) plus 3.00% to 4.25% or the Agent bank’s base rate plus 2.00% to 3.25%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. We were also required to pay quarterly commitment fees of 0.375% to 0.625% per annum on the unused portion of the Old Credit Agreement.

     In June 2011, approximately $1.1 million of secured debt of an affiliate was amended to extend the maturity date to May 2014.

7. Related Party Transactions

     Principal Stockholder Employment Agreement

     In June 2011, we entered into a new employment agreement with Edward K. Christian, Chairman, President and CEO, which became effective as of June 1, 2011, and replaces and supersedes his prior employment agreement. The new employment agreement terminates on March 31, 2018. The agreement provides for an annual base salary of $860,000 (subject to annual increases on each anniversary date not less than the greater of 3% or a defined cost of living increase). Mr. Christian may defer any or all of his annual salary.

     Under the agreement, Mr. Christian is eligible for discretionary and performance bonuses, stock options and/or stock grants in amounts determined by the Compensation Committee and will continue to participate in the Company’s benefit plans. The Company will maintain insurance policies, will furnish an automobile, will pay for an executive medical plan and will maintain an office for Mr. Christian at its principal executive offices and in Sarasota County, Florida. The agreement provides certain payments to Mr. Christian in the event of his disability, death or a change in control. Upon a change in control, Mr. Christian may terminate his employment. The agreement also provides generally that, upon a change in control, the Company will pay Mr. Christian an amount equal to 2.99 times the average of his total annual salary and bonuses for each of the three immediately preceding periods of twelve consecutive months, plus an additional amount for tax liabilities, related to the payment.

     In addition, if Mr. Christian’s employment is terminated for any reason, other than for cause, the Company will continue to provide health insurance and medical reimbursement and maintain existing life insurance policies for a period of ten years, and the current split dollar life insurance policy shall be transferred to Mr. Christian and his wife, and the Company shall reimburse Mr. Christian for any tax consequences of such transfer. The agreement contains a covenant not to compete restricting Mr. Christian from competing with the Company in any of its markets if he voluntarily terminates his employment with the Company or is terminated for cause, for a three year period thereafter.

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

8. 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
		Radio				Television				and Other				Consolidated
		(In thousands)
Three Months Ended June 30, 2011:
Net operating revenue		$	28,611			$	4,572			$	—			$	33,183
Station operating expense			20,004				3,619				—				23,623
Corporate general and administrative			—				—				1,949				1,949
Operating income (loss)		$	8,607			$	953			$	(1,949	)		$	7,611
Depreciation and amortization		$	1,348			$	414			$	59			$	1,821

										Corporate
		Radio				Television				and Other				Consolidated
		(In thousands)
Three Months Ended June 30, 2010:
Net operating revenue		$	28,661			$	4,226			$	—			$	32,887
Station operating expense			19,827				3,330				—				23,157
Corporate general and administrative			—				—				1,897				1,897
Operating income (loss)		$	8,834			$	896			$	(1,897	)		$	7,833
Depreciation and amortization		$	1,444			$	409			$	54			$	1,907

										Corporate
		Radio				Television				and Other				Consolidated
						(In thousands)
Six Months Ended June 30, 2011:
Net operating revenue		$	53,117			$	8,774			$	—			$	61,891
Station operating expense			39,282				7,077				—				46,359
Corporate general and administrative			—				—				3,889				3,889
Operating income (loss)		$	13,835			$	1,697			$	(3,889	)		$	11,643
Depreciation and amortization		$	2,687			$	826			$	113			$	3,626
Total assets		$	153,029			$	26,543			$	22,051			$	201,623

										Corporate
		Radio				Television				and Other				Consolidated
		(In thousands)
Six Months Ended June 30, 2010:
Net operating revenue		$	52,805			$	8,069			$	—			$	60,874
Station operating expense			39,050				6,667				—				45,717
Corporate general and administrative			—				—				3,779				3,779
Operating income (loss)		$	13,755			$	1,402			$	(3,779	)		$	11,378
Depreciation and amortization		$	2,865			$	833			$	106			$	3,804
Total assets		$	154,157			$	26,357			$	25,891			$	206,405

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, 2010. 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 reflected only in our discussion of consolidated results.

     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. The discussion of our operating performance focuses on segment operating income because we manage our segments primarily on operating income. Operating performance is evaluated for each individual market.

General

     We are a broadcast company primarily engaged in acquiring, developing and operating radio and television stations.

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 for a few weeks only. The majority of our revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff. For the six months ended June 30, 2011 and 2010, approximately 86% and 87%, respectively, of our radio segment’s gross revenue was from local advertising. To generate national advertising sales, we engage independent advertising sales representative firms that 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. We experienced a significant increase in political advertising in 2010 due to the number of congressional, senatorial, gubernatorial and local elections in most of our markets. Since 2011 is not an election year, we expect political revenue in 2011 to significantly decline.

     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.

     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 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. Because reaching a large and demographically attractive audience is crucial to a station’s financial success, we endeavor to develop strong listener loyalty. 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 and commissions, depreciation, programming expenses, and advertising and promotion expenses.

     Although the recent global recession has negatively affected advertising revenues for a wide variety of media businesses, radio revenue growth has been declining or stagnant over the last several years, primarily in major markets that are dependent on national advertising. The radio broadcasting industry is subject to rapid technological change, evolving industry standards and the emergence of new media technologies and services (such as the Internet, satellite radio and mp3 players). These recent technologies and media are gaining advertising share against radio and other traditional media.

     During the six months ended June 30, 2011 and 2010 and the years ended December 31, 2010 and 2009, our Bellingham, Washington; Des Moines, Iowa; Manchester, New Hampshire; and Milwaukee, Wisconsin markets, when combined, represented approximately 29%, 30%, 30% and 30%, respectively, of our consolidated net operating 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.

     The following table describes the percentage of our consolidated net operating revenue represented by each of these markets:

		Percentage of Consolidated								Percentage of Consolidated
		Net Operating Revenue for								Net Operating Revenue
		the Six Months Ended								for the Years Ended
		June 30,								December 31,
		2011				2010				2010				2009
Market:
Bellingham, Washington			5%				5%				5%				5%
Des Moines, Iowa			7%				6%				6%				7%
Manchester, New Hampshire			5%				6%				6%				5%
Milwaukee, Wisconsin			12%				13%				13%				13%

     We use certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP) to assess our financial performance. For example, we evaluate the performance of our markets based on “station operating income” (operating income plus corporate general and administrative expenses, depreciation and amortization, impairment of intangible assets, less gain on asset exchange). Station operating income is generally recognized by the broadcasting industry as a measure of performance, is used by analysts who report on the performance of the broadcasting industry and it serves as an indicator of the market value of a group of stations. In addition, we use it to evaluate individual stations, market-level performance, overall operations and as a primary measure for incentive based compensation of executives and other members of management. Station operating income is not necessarily indicative of amounts that may be available to us for debt service requirements, other commitments, reinvestment or other discretionary uses. Station operating income is not a measure of liquidity or of performance in accordance with GAAP, and should be viewed as a supplement to, and not a substitute for our results of operations presented on a GAAP basis.

     During the six months ended June 30, 2011 and 2010 and the years ended December 31, 2010 and 2009, the radio stations in our four largest markets when combined, represented approximately 36%, 38%, 36% and 41%, respectively, of our consolidated station operating income. The following table describes the percentage of our consolidated station operating income represented by each of these markets:

		Percentage of Consolidated								Percentage of Consolidated
		Station Operating Income (*)								Station Operating Income(*)
		for the Six Months Ended								for the Years Ended
		June 30,								December 31,
		2011				2010				2010				2009
Market:
Bellingham, Washington			6%				6%				7%				7%
Des Moines, Iowa			6%				5%				4%				7%
Manchester, New Hampshire			8%				8%				8%				7%
Milwaukee, Wisconsin			16%				19%				17%				20%

Television Segment

     Our television segment’s primary source of revenue is from the sale of advertising for broadcast on our stations. The number of advertisements available for broadcast on our television stations is limited by network affiliation and syndicated programming agreements and, with respect to children’s programs, federal regulation. Our television stations’ local market managers determine the number of advertisements to be broadcast in locally produced programs only, which are primarily news programming and occasionally local sports or information shows.

     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 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.

     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 six months ended June 30, 2011 and 2010, approximately 82% and 80%, respectively, of our television segment’s gross 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. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. We experienced a significant increase in political advertising in 2010 due to the number of congressional, senatorial, gubernatorial and local elections in most of our markets. Since 2011 is not an election year, we expect political revenue in 2011 to significantly decline.

     The primary operating expenses involved in owning and operating television stations are employee salaries and commissions, depreciation, programming expenses, including news production and the cost of acquiring certain syndicated programming, and advertising and promotion expenses.

     Our television market in Joplin, Missouri represented approximately 14%, 12%, 13% and 14%, respectively, of our consolidated operating income (excluding non-cash impairment charge in 2009) for the six months ended June 30, 2011 and 2010 and the years ended December 31, 2010 and 2009.

Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010

Results of Operations

     The following tables summarize our results of operations for the three months ended June 30, 2011 and 2010.

Consolidated Results of Operations

		Three Months Ended
		June 30,								$ Increase				% Increase
		2011				2010				(Decrease)				(Decrease)
		(In thousands, except percentages and per share information)
Net operating revenue		$	33,183			$	32,887			$	296				0.9	%
Station operating expense			23,623				23,157				466				2.0	%
Corporate G&A			1,949				1,897				52				2.7	%
Operating income			7,611				7,833				(222	)			(2.8	)%
Interest expense			1,034				1,468				(434	)			(29.6	)%
Write-off debt issuance costs			1,326				—				1,326				N/M
Other (income) expense, net			(95	)			185				(280	)			N/M
Income taxes			2,176				2,485				(309	)			(12.4	)%
Net income		$	3,170			$	3,695			$	(525	)			(14.2	)%
Earnings per share (basic and diluted)		$	.75			$	.87			$	(.12	)			(13.8	)%

Radio Broadcasting Segment

		Three Months Ended
		June 30,								$ Increase				% Increase
		2011				2010				(Decrease)				(Decrease)
		(In thousands, except percentages)
Net operating revenue		$	28,611			$	28,661			$	(50	)			(0.2	)%
Station operating expense			20,004				19,827				177				0.9	%
Operating income		$	8,607			$	8,834			$	(227	)			(2.6	)%

Television Broadcasting Segment

		Three Months Ended
		June 30,								$ Increase				% Increase
		2011				2010				(Decrease)				(Decrease)
		(In thousands, except percentages)
Net operating revenue		$	4,572			$	4,226			$	346				8.2	%
Station operating expense			3,619				3,330				289				8.7	%
Operating income		$	953			$	896			$	57				6.4	%

     Reconciliation of segment operating income to consolidated operating income:

										Corporate
		Radio				Television				and Other				Consolidated
		(In thousands)
Three Months Ended June 30, 2011:
Net operating revenue		$	28,611			$	4,572			$	—			$	33,183
Station operating expense			20,004				3,619				—				23,623
Corporate general and administrative			—				—				1,949				1,949
Operating income (loss)		$	8,607			$	953			$	(1,949	)		$	7,611

										Corporate
		Radio				Television				and Other				Consolidated
		(In thousands)
Three Months Ended June 30, 2010:
Net operating revenue		$	28,661			$	4,226			$	—			$	32,887
Station operating expense			19,827				3,330				—				23,157
Corporate general and administrative			—				—				1,897				1,897
Operating income (loss)		$	8,834			$	896			$	(1,897	)		$	7,833

     Consolidated

     For the three months ended June 30, 2011, consolidated net operating revenue was $33,183,000 compared with $32,887,000 for the three months ended June 30, 2010, an increase of approximately $296,000 or less than 1%. Gross national revenue and gross local revenue increased approximately $298,000 and $255,000, respectively. Gross political revenue decreased approximately $213,000 in the current year quarter. The increase in gross local revenue was primarily a result of increased local advertising in our Joplin, MO market following a tornado that caused significant damage in the market in May 2011. The increase in gross national revenue was primarily the result of increased advertising from the automotive industry. The decrease in gross political revenue was attributable to political advertising in the prior year quarter as 2010 was an election year.

     Station operating expense was $23,623,000 for the three months ended June 30, 2011, compared with $23,157,000 for the three months ended June 30, 2010, an increase of $466,000 or 2%. Salaries increased approximately $177,000, primarily as a result of the 2.5% reinstatement in April 2011 of the 5% salary reductions implemented in March 2009. Our health care costs increased approximately $285,000 as compared to the prior year quarter primarily as a result of Health Care Reform. These increases were partially offset by a reduction in depreciation and amortization expense of $91,000.

     Operating income for the three months ended June 30, 2011 was $7,611,000 compared to $7,833,000 for the three months ended June 30, 2010, a decrease of approximately $222,000 or 3%. The decrease was a result of the increase in station operating expense, described in detail above, and a $52,000 or 3% increase in corporate general and administrative charges.

     We generated net income of approximately $3,170,000 ($.75 per share on a fully diluted basis) during the three months ended June 30, 2011, compared with $3,695,000 ($.87 per share on a fully diluted basis) for the three months ended June 30, 2010, a decrease of approximately $525,000 or 14%. In the current year quarter we had a decrease in operating income of $222,000, as described above, and decreases in interest expense and income tax expense of $434,000 and $309,000, respectively. The decrease in interest expense was attributable to an average decrease in market interest rates and a decrease in debt. The decrease in income tax expense was directly attributable to operating performance. Additionally, in the current year quarter we recognized a charge of $1,326,000 for the write-off of unamortized debt issuance costs in conjunction with our previous credit agreement. See Note 6 of the Notes to Condensed Consolidated Financial Statements. Other income for the current year period includes a gain of approximately $105,000 recognized from the construction of a tower at one of our markets. The tower was part of an agreement between the Company and AT&T. Other expense for the prior year includes a loss of $248,000 recognized on the disposal of our Doppler radar systems in two of our television markets.

     Radio Segment

     Net operating revenue of the radio segment was relatively unchanged for the three months ended June 30, 2011, compared with the three months ended June 30, 2010. Gross national revenue increased approximately $316,000 for the quarter. Gross political revenue and gross local revenue decreased approximately $195,000 and $171,000, respectively. The increase in gross national revenue was primarily the result of increased advertising from the automotive industry. The decrease in gross political revenue was attributable to political advertising in the prior year quarter as 2010 was an election year. The decrease in gross local revenue was primarily the result of a softening in local advertising in two of our markets.

     Station operating expense for the radio segment was $20,004,000 for the three months ended June 30, 2011, compared with $19,827,000 for the three months ended June 30, 2010, an increase of approximately $177,000 or less than 1%. Salaries increased approximately $126,000, primarily as a result of the 2.5% reinstatement in April 2011 of the 5% salary reductions implemented in March 2009. Our health care costs increased approximately $221,000 as compared to the prior year quarter, primarily as a result of Health Care Reform. These increases were partially offset by a reduction in depreciation and amortization expense.

     Operating income in the radio segment decreased approximately $227,000 to $8,607,000 for the three months ended June 30, 2011, from $8,834,000 for the three months ended June 30, 2010. The decrease was a direct result of the increase in station operating expense described in detail above.

     Television Segment

     For the three months ended June 30, 2011, net operating revenue of our television segment was $4,572,000 compared with $4,226,000 for the three months ended June 30, 2010, an increase of $346,000 or 8%. The increase in net operating revenue was primarily a result of increased local advertising in our Joplin, MO market following a tornado that caused significant damage in the market in May 2011. Our television stations that we own and operate in Joplin did not sustain damage in the tornado.

     Station operating expense in the television segment for the three months ended June 30, 2011 was $3,619,000, compared with $3,330,000 for the three months ended June 30, 2010, an increase of approximately $289,000 or 9%. The increase in station operating expense was primarily a result of increased sales expense and health care costs as compared to the prior year quarter.

     Operating income in the television segment for the three months ended June 30, 2011 was $953,000 compared with $896,000 for the three months ended June 30, 2010, an increase of approximately $57,000 or 6%. The increase was a direct result of the improvement in net operating revenue, described in detail above.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

     Results of Operations

     The following tables summarize our results of operations for the six months ended June 30, 2011 and 2010.

Consolidated Results of Operations

		Six Months Ended
		June 30,								$ Increase				% Increase
		2011				2010				(Decrease)				(Decrease)
		(In thousands, except percentages and per share information)
Net operating revenue		$	61,891			$	60,874			$	1,017				1.7	%
Station operating expense			46,359				45,717				642				1.4	%
Corporate G&A			3,889				3,779				110				2.9	%
Operating income			11,643				11,378				265				2.3	%
Interest expense			2,191				2,987				(796	)			(26.7	)%
Write-off debt issuance costs			1,326				—				1,326				N/M
Other (income) expense, net			(27	)			(3,411	)			3,384				N/M
Income taxes			3,321				4,790				(1,469	)			(30.7	)%
Net income		$	4,832			$	7,012			$	(2,180	)			(31.1	)%
Earnings per share (basic and diluted)		$	1.14			$	1.66			$	(.52	)			(31.3	)%

Radio Broadcasting Segment

		Six Months Ended
		June 30,								$ Increase				% Increase
		2011				2010				(Decrease)				(Decrease)
		(In thousands, except percentages)
Net operating revenue		$	53,117			$	52,805			$	312				0.6	%
Station operating expense			39,282				39,050				232				0.6	%
Operating income		$	13,835			$	13,755			$	80				0.6	%

Television Broadcasting Segment

		Six Months Ended
		June 30,								$ Increase				% Increase
		2011				2010				(Decrease)				(Decrease)
		(In thousands, except percentages)
Net operating revenue		$	8,774			$	8,069			$	705				8.7	%
Station operating expense			7,077				6,667				410				6.2	%
Operating income		$	1,697			$	1,402			$	295				21.0	%

     Reconciliation of segment operating income to consolidated operating income:

										Corporate
		Radio				Television				and Other				Consolidated
		(In thousands)
Six Months Ended June 30, 2011:
Net operating revenue		$	53,117			$	8,774			$	—			$	61,891
Station operating expense			39,282				7,077				—				46,359
Corporate general and administrative			—				—				3,889				3,889
Operating income (loss)		$	13,835			$	1,697			$	(3,889	)		$	11,643

										Corporate
		Radio				Television				and Other				Consolidated
		(In thousands)
Six Months Ended June 30, 2010:
Net operating revenue		$	52,805			$	8,069			$	—			$	60,874
Station operating expense			39,050				6,667				—				45,717
Corporate general and administrative			—				—				3,779				3,779
Operating income (loss)		$	13,755			$	1,402			$	(3,779	)		$	11,378

     Consolidated

     For the six months ended June 30, 2011, consolidated net operating revenue was $61,891,000 compared with $60,874,000 for the six months ended June 30, 2010, an increase of approximately $1,017,000 or 2%. Gross national revenue and gross local revenue increased approximately $641,000 and $965,000, respectively. Gross political revenue decreased approximately $355,000 for the six months ended June 30, 2011 as compared to the prior year period. The increase in gross national revenue was primarily the result of increased advertising from the financial services and automotive industries. The increase in gross local revenue was a result of increased local advertising in our Joplin, MO market following a tornado that caused significant damage in the market in May 2011, and an increase in advertising spending in general. The decrease in gross political revenue was attributable to political advertising in the prior year quarter as 2010 was an election year.

     Station operating expense was $46,359,000 for the six months ended June 30, 2011, compared with $45,717,000 for the six months ended June 30, 2010, an increase of approximately $642,000 or 1%. Salaries increased approximately $177,000, primarily as a result of the 2.5% reinstatement in April 2011 of the 5% salary reductions implemented in March 2009. Our health care costs increased approximately $775,000 as compared to the prior year period, primarily as a result of Health Care Reform. Additionally, we had a decrease in depreciation and amortization expense of $185,000 as compared to the prior year period.

     Operating income for the six months ended June 30, 2011 was $11,643,000 compared to $11,378,000 for the six months ended June 30, 2010, an increase of approximately $265,000, or 2%. The increase was a direct result of the improvement in net operating revenue partially offset by an increase in station operating expense, described in detail above, and an $110,000 or 3% increase in corporate general and administrative charges. The increase in corporate general and administrative charges was attributable to increased IT expenses.

     We generated net income of approximately $4,832,000 ($1.14 per share on a fully diluted basis) during the six months ended June 30, 2011, compared with $7,012,000 ($1.66 per share on a fully diluted basis) for the six months ended June 30, 2010, a decrease of approximately $2,180,000 or 31%. In the current year period we had an increase in operating income of $265,000, as described above, and decreases in interest expense and income tax expense of $796,000 and $1,469,000, respectively. The decrease in interest expense was attributable to an average decrease in market interest rates of approximately 0.64%, and a decrease in debt. The decrease in income tax expense was directly attributable to operating performance. Additionally, in the current year period we recognized a $1,326,000 charge for the write-off of unamortized debt issuance costs in conjunction with our previous credit agreement. See Note 6 of the Notes to Condensed Consolidated Financial Statements. Other income for the current year period includes a gain of approximately $105,000 recognized from the construction of a tower at one of our markets. The tower was part of an agreement between the Company and AT&T. In the prior year period, we had non-recurring income of $3,561,000 resulting from an agreement to downgrade an FCC license at one of our stations and a loss of $248,000 recognized on the disposal of our Doppler radar systems in two of our television markets.

     Radio Segment

     For the six months ended June 30, 2011, net operating revenue of the radio segment was $53,117,000 compared with $52,805,000 for the six months ended June 30, 2010, an increase of $312,000 or less than 1%. Gross national revenue and gross local revenue increased approximately $646,000 and $105,000, respectively. Gross political revenue decreased approximately $307,000 for the six months ended June 30, 2011 as compared to the prior year period. The increase in gross national revenue was primarily the result of increased advertising from the financial services and automotive industries. The decrease in gross political revenue was attributable to political advertising in the prior year as 2010 was an election year.

     Station operating expense for the radio segment was $39,282,000 for the six months ended June 30, 2011, compared with $39,050,000 for the six months ended June 30, 2010, an increase of approximately $126,000 or less than 1%. Salaries increased approximately $126,000, primarily as a result of the 2.5% reinstatement in April 2011 of the 5% salary reductions implemented in March 2009. Our health care costs increased approximately $635,000 as compared to the prior year period, primarily as a result of Health Care Reform. These increases were partially offset by reductions in bad debt expense and ratings service expense of approximately $203,000 and $146,000, respectively. Additionally, we had a decrease in depreciation and amortization expense of $178,000 as compared to the prior year period.

     Operating income in the radio segment was relatively unchanged for the six months ended June 30, 2011 compared with the six months ended June 30, 2010.

     Television Segment

     For the six months ended June 30, 2011, net operating revenue of our television segment was $8,774,000 compared with $8,069,000 for the six months ended June 30, 2010, an increase of $705,000 or 9%. The increase in net operating revenue was a result of an increase in local advertising in our Joplin, MO market following a tornado that caused significant damage in the market in May 2011, and improvements in advertising spending in general.

     Station operating expense in the television segment for the six months ended June 30, 2011 was $7,077,000, compared with $6,667,000 for the six months ended June 30, 2010, an increase of approximately $410,000 or 6%. The increase in station operating expense was from an increase in sales commission and selling expenses of $122,000 as a result of increased revenue. Additionally, our health care costs increased approximately $140,000 in the current year, primarily as a result of Health Care Reform.

     Operating income in the television segment for the six months ended June 30, 2011 was $1,697,000 compared with $1,402,000 for the six months ended June 30, 2010, an increase of approximately $295,000 or 21%. The increase was a direct result of the improvement in net operating revenue partially offset by an increase in station operating expense, described in detail above.

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 2011 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 Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

Liquidity and Capital Resources

     Debt Arrangements and Debt Service Requirements

     On June 13, 2011, we entered into a new $120 million credit facility (the “Credit Facility”) with a group of banks, to refinance our outstanding debt under the credit agreement in place at March 31, 2011 (the “Old Credit Agreement”). The Credit Facility consists of a $60 million term loan (the “Term Loan”) and a $60 million revolving loan (the “Revolving Credit Facility”) and matures on June 13, 2016. An additional $40 million financing may, in the future, be made available to the Company subject to compliance with terms and conditions of the Credit Facility.

     We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility.

     We wrote-off unamortized debt issuance costs relating to the Old Credit Agreement of approximately $1.3 million, pre-tax, due to this refinancing during the quarter ended June 30, 2011.

     The proceeds from the Credit Facility were used to refinance our Old Credit Agreement and pay transactional fees. The unused portion of the Revolving Credit Facility is available for general corporate purposes, including working capital, capital expenditures, permitted acquisitions and related transaction expenses and permitted stock buybacks. The Credit Facility permits up to $25 million, annually, in aggregate amount of additional business acquisitions, subject to certain terms and conditions as set forth in the Credit Facility in further detail, and also permits the Company to make up to $20 million, annually, in aggregate amount of dividends, distributions and stock redemptions.

     The Term Loan principal amortizes in equal installments of 5% of the Term Loan during each year, however, upon satisfaction of certain conditions, as defined in the Credit Facility, no amortization payment is required. The Credit Facility is also subject to mandatory prepayment requirements, including but not limited to, certain sales of assets, certain insurance proceeds, certain debt issuances and certain sales of equity. Optional prepayments of the Credit Facility are permitted without any premium or penalty, other than certain costs and expenses.

     Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR plus 1.50% to 2.75% or the base rate plus 0.50% to 1.75%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. We also pay quarterly commitment fees of 0.25% to 0.375% per annum on the unused portion of the Revolving Credit Facility.

     The Credit Facility contains a number of financial covenants (all of which we were in compliance with at June 30, 2011) which, among other things, require us to maintain specified financial ratios and impose certain limitation on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.

     We had approximately $32.0 million of unused borrowing capacity under the Revolving Credit Facility at June 30, 2011.

     In June 2011, approximately $1.1 million of secured debt of an affiliate was amended to extend the maturity date to May 2014.

     Sources and Uses of Cash

     During the six months ended June 30, 2011 and 2010, we had net cash flows from operating activities of $11,556,000 and $12,826,000, 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 Facility. 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.

     Our capital expenditures, exclusive of acquisitions, for the six months ended June 30, 2011 were approximately $2,522,000 ($2,146,000 for the corresponding period in 2010). We anticipate capital expenditures in 2011 to be approximately $5.5 million, which we expect to finance through funds generated from operations.

     Summary Disclosures About Contractual Obligations and Commercial Commitments

     We have future cash obligations under various types of contracts, including the terms of our Credit Facility, 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, 2010.

     With the exception of our new Credit Facility disclosed in Note 6 and the new employment agreement with our Chairman, President and CEO disclosed in Note 7, there have been no material changes to such contracts/commitments during the six months ended June 30, 2011. We anticipate that our contractual cash obligations will be financed through funds generated from operations or additional borrowings under the Credit Facility, 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, 2010.

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, 2010 for a complete discussion of our market risk. There have been no material changes to the market risk information included in our 2010 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 June 30, 2011, 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 6. Exhibits

10(a)		Credit Agreement dated as of June 13, 2011 among the Company and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the Other Lenders party thereto, Merrill Lynch Pierce, Fenner & Smith, Incorporated and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Book Managers, JPMorgan Chase Bank, N.A., as Syndication Agent, Huntington National Bank, as Documentation Agent, and certain other financial institutions as party thereto.
10(p)		Employment Agreement of Edward K. Christian dated as of June 17, 2011.
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 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 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.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.