Nexstar Media Group Inc (NXST) 2003 Q4 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the Nexstar Broadcasting fourth-quarter 2003 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company, we will open up the conference for questions and answers after the presentation.

All statements and comments made by management during this conference call, other than statements of historical fact, are or may be deemed to be forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933 and Section 21-E of the Securities Exchange Act of 1934. Our future financial conditions and results of operations, as well as any forward-looking statements, are subject to change.

The forward-looking statements and comments made during this conference call are made only as of the date of this conference call and we do not have or undertake any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

I will now turn the conference over to Perry Sook, Nexstar's President and Chief Executive Officer. Please go ahead, Mr. Sook.

Thank you, Janine. Good morning, everyone. Thank you for joining us today and welcome to Nexstar Broadcasting's first earnings call as a public equity company.

With me here today is Bob Thompson, Nexstar's Chief Financial Officer, as well as Shirley Green, Nexstar's Vice President of Finance.

We will report today on our Q4 2003 and our full-year financial results as well as make time for all of your questions. Given that today is March 25th, we will be in a position to give you some pretty good first-quarter guidance as well.

The year of 2003 was one of tremendous accomplishment for Nexstar. We started the year with 20 stations under our ownership or management and we ended the year with 44, more than doubling the size of our company. Our 44 stations reach in excess of 8 million television households, or approximately 1 out of every 14 in America. We're now ranked as the 21st largest television group in terms of total revenues.

Our 2,138 employees are working to create shareholder value by serving our communities in many ways, not the least of which is the 493 hours of local news broadcasts that we produce each week.

On the financial side of our business, in 2003, we strengthened our capital structure with two bond offerings, two senior debt financings and four months ago almost to the day, the completion of our initial public equity offering. We think that all of those achievements in 2003 position the Company to deliver strong financial results and returns to our shareholders in, 2004 but more on 2004 in just a few minutes.

Let's first review the numbers from Q4, 2003. Net Broadcast revenue for the quarter was 52.4 million, compared to 57.7 million in Q4 of 2002, a decline of 5.3 million, or 10.1 percent. Political advertising revenue was $2 million in Q4 of 2003, compared to 17.6 million in Q4 of 2002, a cyclical decline of $15.6 million, which was partially offset by a 17.8 percent increase in local and national revenues. Those local and national revenues were 54.8 million in Q4 of 2003, compared to 46.5 million in Q4 of 2002.

Our Broadcast cash flow was $20.2 million for the fourth quarter of 2003, compared to 27.8 million in the fourth quarter of 2002 -- again, with the decline directly attributable to odd-year comparisons on political revenue. A reconciliation between our actual consolidated statements of operations and our broadcast cash flow is included in our press release, which can also be found on our Web site, www.Nexstar.pd (ph).

On a pro forma basis, as if we have owned or operated all acquired stations for all of 2002 and 2003, our net revenue for the quarter would have declined 20 percent with our core national and local business up 3 percent. That core revenue increase in Q4 was the highest quarterly increase in core business in all of 2003. Our operating expenses would have declined by 5.9 percent in Q4 of 2003 when compared to 2002 by that same pro forma major.

As to revenue categories in the quarter, automotive in the fourth quarter was up slightly, as was retail. The furniture category was up mid single digits, while medical and banking revenues (inaudible) categories were up double digits for our company. Decliners were legal services, grocery, and fast food was the biggest percentage loser, down double digits. Our infomercial on our Telcom revenues were basically flat in Q4.

Our Capital Expenditures for the quarter totaled $1.9 million, compared to $3.8 million in Q4 of 2002. For the full year of 2003, our net Broadcast revenue was $193.5 million, compared to 188.1 million for 2002. Broadcast cash flow for the full year was 70.8 million, a 7.7 percent decrease from our 2002 full-year total of 76.7 million. Our full-year CapEx was $10.3 million, compared to 11.5 million for 2002, and of that 10.3 million, approximately 3.4 million of the 2003 total was spent on VTV.

I will be back in a few minutes to discuss recent developments and offer guidance for the first quarter of 2004 but right now, I would like to turn the presentation over to Bob Thompson. Bob?

Thanks, Perry. Firstly, I'd like to reiterate that the results for the 2003 and 2002 periods include the December 2003 acquisition of Quorum Broadcast Holdings. The acquisition has been accounted for as a merger under common control. That is in a manner similar to a pooling of interest. Now, therefore, Nexstar's results include the financial results of all of Quorum's subsidiaries for all of the periods presented in this release.

Speaking as to the release, Nexstar reported a loss from operations of 13.1 million in the fourth quarter of 2003 and a loss from operations of $4 million for the full year of 2003. The quarter and full-year loss from operations do include the following items -- 11.8 million of merger expenses related to Quorum and 4.1 million of expense related to our IPO. The 11.8 million expense that is related to the Quorum merger are the types of costs that would typically be capitalized in a transaction accounted for as a purchase. However, as this transaction is similar to a pooling, these costs must be expensed.

As to a few other items on the income statement, our interest expense is 25.2 million for the fourth quarter of 2003. Included in that 25.2 are nonrecurring items of $6.7 million related to (indiscernible) premiums and accelerated amortization on Quorum senior discount notes, which will (indiscernible) at the time of the merger on December 30, 2003, and $3.9 million related to the adoption of FAS No. 150, which requires the Company to account for the change in fair value of its mandatory redeemable units as an adjustment to interest expense.

The full-year interest expense of $68.3 million also includes the 6.7 million and $3.9 million of nonrecurring items.

The income statement also reflects a loss on extinguishment of debt of $5 million for the fourth quarter 2003 and $10.8 million for the full year. These amounts are to write off previously capitalized debt financing costs that are associated with the various Quorum and Nexstar debt instruments that were paid off in 2003.

Nexstar also recognized a tax benefit in the fourth quarter of 17.3 million and 14.9 million for the year. The tax benefit resulted from the reorganization done by Nexstar at the time of our IPO, which allowed us to utilize NOL to give us a significant deferred tax liability that had arisen from a prior station acquisition that was a stock purchase.

Further, as to NOLs, the Company has approximately $300 million of NOL carryforwards as of December 31, 2003.

Additionally, upon implementation of FAS No. 150, we had a cumulative effect of change in accounting principle of $8.9 million, which was to mark the redeemable used to fair market value at the time of the implementation of that FAS. All of the aforementioned items were parts that led to net losses of 24.4 million for the fourth quarter of 2003 and 71.8 million for the full year.

For the full year, we also had accretion of preferred interest of $15.3 million that resulted in a net loss of $87.1 million attributable to common shareholders.

The weighted average shares outstanding for the fourth quarter of 2003 was 18.9 million shares and 15.5 million weighted average shares for the full year. This resulted in net loss per share of $1.29 for the quarter and $5.59 for the full year. At the end of 2003, there were 28.4 million shares outstanding, so that would be a pretty good benchmark to use as we move forward into 2004 and calculating your weighted average shares outstanding.

As for a few items on the balance sheet, our cash on hand at December 31 was $10.8 million and our debt on the balance sheet at the end of the year consisted of the following items -- a term loan of $195 million; $10 million outstanding under our revolver; the 12 percent notes that accreted to $155.5 million at the end of the year; and our newly issued 7 percent Senior Subordinated Notes were at $125 million. At the operating company level, this gives us a total of $485.5 million of debt, less the $10.8 million of cash on hand gives us a net debt outstanding of $474.6 million.

Additionally, through the holding company level, we have the 16 percent notes, which have an accretive value of $28.9 million at the end of December 31st. The 11 3/8 notes that we issued in 2003 had an accretive value of $81.3 million. Then there was additionally a FAS 133 hedge adjustment of $3.3 million on the balance sheet at year end, which gives us total debt through the (inaudible) level of $598.9 million.

Leverage at December 31, as calculated per our senior credit facility, was 6.4 times versus the covenant of 7 times. Just as another note, subsequent to year end, the 16 percent senior discount notes were redeemed by Nexstar on January 5, 2004.

Thank you, Bob. As to recent developments, two weeks ago, the FCC approved Mission's (ph) acquisition of WUTR-TV, the ABC affiliate in Utica, New York (indiscernible) Clear Channel Communications. The same day, the FCC approved Mission's acquisition of WBAK-TV, the Fox affiliate in Terra Haute, Indiana, from (indiscernible) Communications. The total acquisition price for these two stations is $6.725 million. We feel these are the most recent data points that validate the FCC's comfort with our virtual duopoly strategy, as each transaction was disclosed as a Mission acquisition with Mission entering into a JFA and SFA with the Nexstar stations in those markets at the time of closing. Both transactions are now scheduled to close early in the second quarter.

In Evansville, as you may know, when we acquired Quorum, we inherited a contract to sell WTVW, the Fox affiliate in Evansville, Indiana, to GNS Media, who in turn had announced its intentions to enter into a JFA FSA relationship with Liberty Corp.'s WFIE-TV in that market, subject to FC1C approval. The FCC did approve the transaction in the fourth quarter with its order becoming final order in the third week of January. It was only after the FCC order became final that we were informed that GNS Media and its financial and JSA FSA partner, Liberty Corp., would not perform for the terms of the contract. We are continuing to pursue a claim against GNS and Liberty Corp. for their failure to perform under the terms of the contract. Meanwhile, we have fully engaged in the operations of the station, brought them up to speed on our systems, eliminated in excess of $500,000 of nonessential costs, and I'm pleased to say that the station is well on its way to achieving its first-quarter revenue budget.

In 2004, Evansville will add between 7.5 and $8 million to our net revenues and between 3.5 and $4 million to our Broadcast cash flow. Adding that station into our mix will also add approximately $500,000 million to both CapEx and corporate overhead budgets for the year of 2004.

As for integrating the rest of the Quorum stations, we've made great progress in bring the operations of these stations up to Nexstar standards. As you know, we began managing the Quorum stations the day we signed the definitive agreement to acquire the company in September of last year and since that time, we have converted all of the stations to the Nexstar financial, traffic and sales and reporting systems and bought out or renegotiated some 33 contracts with vendors, harvested in close to $5 million in cost savings in part by eliminating over 75 nonessential positions. I have replaced five general managers; we've moved the national sales representation to the Petrie (ph) Media Corp. and we've transitioned all employees to our Health and Benefit plan.

We look to drive incremental revenue growth in all of our properties in 2004 through the introduction of a number of nontraditional revenue programs. One example is our Viewers Club, which features merchant sponsorships and (indiscernible) as well as sweepstakes mechanisms to build viewer benefit and viewer -- audience viewership of at our stations.

Another project is our Infoline service, which is a talking Yellow Page service focused primarily on legal, healthcare and real estate categories. Those have not been traditional big TV spenders. We will also expand our Internet-based news and weather delivery service in 2004. Taken together, just these three examples should generate in excess of $2.5 million of incremental revenue in 2004.

While on the subject of 2004, before we get to questions, let me comment on our Q1 2004 guidance. With one selling week left in the quarter, the Company has achieved a double-digit same-station gain in advertising sales, which is consistent with our previous guidance. The double-digit revenue gain is made up of a mid single digit percentage increase in core revenue growth as well as a mid single digit percentage contribution of political revenue.

The trajectory of the momentum is very promising. January same-station revenue was plus 4, February plus 11 and March is on track to finish ahead of that on a percentage basis. Both core revenue growth and political grew sequentially in each month of the quarter.

Our same-station operating expenses will be down a significant amount for the first quarter as a result of the expense reductions that we executed in 2003, all of which will combine to generate a significant same-station cash flow and EBITDA increase over last first quarter.

With that, I would like to ask Janine to open the phone lines so that we can take your questions.

(Operator Instructions). Victor Miller with Bear Stearns.

Victor Miller; Good morning. A couple of things, first of all, could you talk -- now that you have actually owned Quorum for several months, could you also talk about generally where you felt those stations were operationally, compared to how you would like to see those stations? How much, philosophically how much upside do you think there is on a revenue expense side? You talked a little bit about expenses. Bob, could you also talk -- do you have numbers available yet that provide us quarterly pro formas for everything that you own for 2003 revenues, BCF, EBITDA, so that we can start, as you provide guidance, to actually have a base upon which to grow those expectations?

Then lastly, how do you look at that Hagerstown station? Is that something that you would ever look to sell, or is it still something that generates sufficient levels of cash flow that it serves the purpose of just keeping it for its cash flow generation?

Let me answer the pro forma question first. I intend to post that quarterly information to our Web site and have that done and available by the end of next week. That will lay out the quarterly information, as you have just requested.

I will speak to the Quorum stations and the Quorum acquisition. As I mentioned previously, during this quarter, I will have visited all but two of our 27 markets; that includes my second and, in some cases third, visit to the Quorum markets, part of our annual GM evaluation and goal setting for the year in which we are in, so I think we have pretty granular knowledge and a pretty good feeling of the state of play, not only of our business and our guidance but of what we inherited and where we are in the Quorum properties.

I think that when we looked at measuring the Quorum stations against a number of metrics, a number of things kind of jumped out at us. Obviously, first of all, their margins were about 10 points behind ours in similar sized markets. Their shares of duopoly revenue in the markets in which they operate duopoly was approximately one-third. Our average share of revenue where we operate duopolies is approximately 50 percent. Obviously, we saw opportunities to increase the margins through cost take-outs and vendor negotiation and renegotiation.

I think Bob has said this before. I think that there was somewhat of a shorter term mentality at the Quorum stations, almost a renter's mentality that, given the previous experience of the senior management team, they tended to be in and out of investments in two to three years and this one had gone for about 5. So, we think that our approach to the stations is one of much more long-term. We are trying to build long-term value in those stations by prudent investment in capital, which we have already begun to deploy. We have converted all of the stations to the Nexstar sales and traffic and accounting systems.

One of the things that jumped out -- I know with Bob and Shirley early on -- was that, when we started our due diligence early on last year and began to get financial information, we got four different types of financial statement presentation. We, early on in our process in taking over the station, spend about $500,000 to convert all of the stations to the same traffic and accounting systems, same chart of accounts so that we can measure performance on an apples-for-apples basis.

We have replaced general managers in five of the markets at this point in time, feeling that we needed people that understood our approach and way of doing business. We have made the changes that we felt were necessary to make and the stations are now fully participating in everything that we do -- our weekly revenue pacing reports, our monthly financial reports, all of their budgets are on our templates now and the stations participate fully as if we had owned them for a long time.

As it relates to Hagerstown, Victor, obviously the station is doing very well. We're getting political revenue for the Maryland governor's race at this point in time. The station will be a substantial cash flow contributor. However, again, I think we have said from the beginning that while we have never sold anything in the Company, there may be assets that might have more strategic value to someone else than they do to our company as a cash flowing business. Hagerstown looks to me as if, potentially, it could be worth more to a Washington D.C. market operator as a duopoly play than it is to us (indiscernible) conventional multiple of cash flow.

Having said that, I have not had any (inaudible) conversations with any member of any company that operates television stations in Washington or who may like to operate stations in that marketplace. But that is something that we will do over the course of the year to determine what is the best course for maximizing our shareholder value. There may be other properties. Again, we've never sold anything but there may be properties that are not strategic to us that may be more important to someone else in a region of the country or in or adjacent to a cluster of stations that they have (indiscernible) we may be operating in an orphaned market.

Bob, just one follow-up on your comment that (inaudible) numbers available next week. In the interim, since we will have to be providing some sense of what we should expect for first quarter as we write our notes tonight, is there any way you can provide us some insights on the base revenues and expenses and cash flow for the first quarter at least?

Sure. The net revenue -- and that is including trade -- net Broadcast revenue, combining Nexstar and the Quorum stations, is about 42.1 million.

This includes all of your acquisitions as well?

No, this is for Nexstar and Quorum. For the most part, with the exception of WBAK, which came in after the first quarter of '03 and KPOM, which came in during the fourth quarter, everything else is pretty much (inaudible), Victor. So it is about 42.1 million of net Broadcast revenue, 5.1 of trade and barter, which gives you 47.2 million of net revenues. Direct operating expenses was about 14.1 million, SG&A of about 15.1, and that gives you about 18.

19.2 of expenses?

Right, that will give you about I think 18 million of cash flow prior to cash programming. The cash programming was about 2.8 million in the first quarter of '03, which gives you a cash flow number of about 15.2 -- (MULTIPLE SPEAKERS) -- overhead expenses were about 1.149 million in that first quarter. I think you guys have been projecting out something along the lines of about in the 9s for total corporate overhead for '04.

So then the only thing this is missing is just the portions of two stations, right?

That is correct.

So we should make slight adjustments in all of these numbers?

The numbers that Bob read to you obviously would be the first-quarter '03 numbers as we would report them on a GAAP basis, which would include Quorum and any acquisition that was with us for the full year of 2003. But as he mentioned, the Terra Haute station came into the mix, financial mix, the Fox station. We began running that in Q2 of 2003 and we began operating the Fort Smith/Fayetteville NBC affiliate in Q4 of 2003. Those would not be in these Q1 '03 numbers.

Okay, thank you.

Bishop Cheen with Wachovia.

Good morning, Perry. Good morning, Robert. I have two questions. One is to get you talking a little bit more about political and what you think or feel the way the year is going to shake out. I realize that a lot of it is back-end loaded so it is crystal ball-ish, but you have always had robust political in your clinical years and always in different states or regions etc.

Two, you touched on in your press release and that is the balance sheet management. Sort of what your goal would be for how much debt you would like to pay down on the new facility this year, assuming robust free cash flow and the opportunity to complete those acquisitions you have remaining and then do something with your balance sheet.

Okay, Bishop. Thank you. I will report on political. As of today, we have political advertising revenues for the first quarter in every market in which we operate. The meaningful political right now is in the states of Pennsylvania, Illinois, Missouri, Arkansas and Louisiana. Specifically, the presidential contest has heated up in Arkansas, Pennsylvania and Missouri. On top of that, substantial statewide activity for statewide races in Pennsylvania, Maryland, Louisiana. Also, we have issue advertising related primarily to healthcare with the AARP on one side and the United States Chamber of Commerce on the other. They have both started spending this past week, but we do have political advertising up some dollar amount, representing every market in the Company for the first quarter.

As it relates to leverage, obviously 2004 for us -- you know, the focus is strengthening our balance sheet through meaningful deleveraging. People ask about acquisitions. I'm always involved in a number of conversations. I probably have three or four separate acquisition discussions ongoing at the current time. Nothing is imminent and the size of those potential acquisitions, since all of the current conversations involve potential doubled-up opportunities for us in markets where we already operate a station. Again, it would be in the scope of our company fairly at diminimus.

The focus of the Company this year is going to be on strengthening our balance sheet through deleveraging and using our free cash flow generation from political to do primarily that. I will let Bob speak a little bit more to the specifics and the mechanics of how we would plan to delever this year.

Perry, just one quick follow-up -- the numbers again for political for Q4 for the 2 million versus (indiscernible), was that net or gross, the way that you reported them this morning?

Those are gross advertising dollars.

Bishop, relative to our debt structure, I think as we look to pay down debt, we will obviously look at amounts outstanding under our revolver. That will be the primary area of reduction for 2004.

Then just looking out a little bit further beyond that into 2005, we have our 12 percent bonds outstanding with a First Call date in April of '05 at 106. Given the prevailing market rates and the opportunity to arbitrage that debt into a coupon that is a lot closer to where we issued the 7 percent notes in this past December, you know, that is an opportunity that we will certainly look at in '05 and provide a meaningful free cash flow pick-up in that time period.

Robert, just refresh our memory again, the capacity and the amount outstanding on your revolver and on your term on the new credit facility?

The new term loans have $195 million outstanding. At the end of the year, it was 10 million outstanding under our revolver.

The capacity of the revolver?

It is an $80 million revolver.

Okay, so as we closed the year with this, your availability on the credit facility stands at what?

Obviously, we have got 10 million drawn at the end of the year, Bishop. Right after the end of the year, we redeemed our 16 percent notes (inaudible) about $34 million, so that is an amount that basically switched in its characteristics from senior discount notes and was funded through these credit facility (sic), so right in January, shortly after the end of the year, there is about 40 million outstanding under the Nexstar revolver.

Forty of the eighty is outstanding now pro forma for the -- (Multiple Speakers) -- transactions?

That is correct, and there is a small amount of borrowings, about $3 million, under the Mission portion of that revolver.

Thank you, gentleman.

Tim Wallace with UBS.

Thanks a lot. Perry, how much political revenue did you book in the first quarter? What is the second quarter looking like in terms of political? Third, how are you pacing on local and national in the second quarter? Thanks.

Thank you, Tim. We have not reported our first-quarter results yet, although we have a pretty good handle on where they are at the 25th day of the third month of the quarter. I can tell you that we -- obviously, we said that our political for the first quarter will be a mid single digit contribution of our double-digit ad sales revenue increase. I can also further tell you that the political for the first quarter will be greater than the political for the fourth quarter of last year. I do not know that I should necessarily be more specific than that at this point in time.

But as it relates to second-quarter guidance, we just completed our revenue calls with all 44 stations and we are conservatively projecting, at this point in time, that core revenue growth for Q2 will mirror that where we end up in 2000 -- where we ended up in Q1.

Auto spending, at this point for the second quarter, our (indiscernible) category looks to be up for us in Q2.

Political, obviously, will be the unknown. Right now, we are pacing double-digit percentages ahead of our political for the second quarter of 2003. Now, Q2 of '03 was somewhat of an anomaly for us in that we did in excess of $1.5 million in political in Q2 of '03 in a nonpolitical year. Primarily statewide races in West Texas for open seats, in Pennsylvania for statewide judicial office, in Illinois, which was basically an early start on the U.S. Senate race. We also had political spending in New York and Indiana primarily for local races germane to the markets that we're in. But we are pacing double-digits ahead of that number in Q2.

Obviously, if you look across a calendar year, you would expect the lightest amount of political advertising in the second quarter, given the primary cycle and the general election cycle, but we are pacing double digits ahead. As I mentioned, our core revenue growth, at this point, having just completed 44 revenue calls with our stations for second quarter, it looks as if our core revenue for the second quarter will mirror the guidance that I gave for the first quarter.

Just a follow-up on that, political in the first quarter, does it come in below your expectations? If it did, why?

No. Moving around by state, we've got slightly less in Missouri than we had anticipated; we got a lot more in Illinois and Pennsylvania. Our political spending in March is substantially over-budget; it was slightly under-budget in January. On balance, I think that we are in the neighborhood of the numbers that we have discussed earlier, so it was not significantly above or below our expectations. I would say it was about right on target for what we expected.

Okay, good. Thanks a lot.

Jonathan Jacoby of Banc of America.

Good morning. Just some quick follow-up questions, most of my questions have been answered. When we look at some of these numbers, what percentage of growth should we look for on sort of the nontraditional revenue side, your promotions, etc,. for the first quarter and sort of may be you can lay it out for the full year.

Then in terms of just to follow (indiscernible) in Evansville and perhaps some other stations, are there anything in your portfolio that perhaps you're looking to monetize beside the Hagerstown station?

Okay. Thank you, Jonathan. As it relates to nontraditional revenue, it has been growing at double-digit rates, what we call nontraditional projects selling through the first -- through 2003. That represented approximately -- between 15 and 16 percent of our total local revenue was tied to some project or nontraditional revenue exercise in the first quarter. That number is approaching 20 percent, obviously of a number that grew.

Our new direct business is another subset on that, and that is usually 5 to 6 points of revenue, of our local revenue, in any given quarter. That number should not vary insignificantly when the first quarter goes into the books.

Again, we are not actively attempting to sell Hagerstown, particularly for our general manager and staff, if they're listening there. Obviously, we will do anything that is in the best interest of our shareholders, which may include a sale at some point in time.

I think, if you look at markets where we have television stations and look at what the Company's core business is, I would say any market where we have a stand-alone station -- you know, obviously, our aim would be to double-up or perhaps use that as currency to allow us to double-up in some other markets. Obviously, 98 percent of our revenue comes from the three operating clusters of the mid-Atlantic states, the Midwest and the Southwest, which leaves a small percentage for Montana and Alabama, which obviously are not geographically strategic to us at this point in time. But again, we are not involved in active discussions or negotiations to sell many of our properties but we will approach those divestitures or any potential divestiture just as opportunistically as we would approach adding another station that created value. So, we have an open mind and are willing to have those discussions and continue ongoing to survey opportunities to create value for the shareholders.

Just a quick follow-up on my first question -- could you give us a breakdown between local versus national? Also, if you can give us some color on the quarter, first quarter, and the trends that you're seeing it local also -- sort of a breakdown between local and national?

We don't really keep score on categories that way, Jonathan. I can tell you, as I mentioned, automotive spending for first quarter is flat to up just a little bit; fast food down; retail up for us; infomercial programming will be up; Telecom will be up. Other categories -- you know, early bookings from Kraft and General Mills have driven the corporate category. We have new spending new to our markets from H&R Block, which will be -- should be in excess of a quarter of $1 million this year.

As it relates to comparing local to national in terms of percentage growth, both will be up approximately on the same quarter of magnitude, from a core revenue perspective, mid single digit growth, again, and the national number would be excluding political. So, there is no over-arching theme national in the first quarter, excluding political performance -- slightly better than local did on a percentage basis but it is within a point of local. I think that had to do primarily with some of the categories that were up with the bulk of that business coming through national advertising agencies.

Thank you so much.

Bill Meyers of Lehman Brothers.

Thanks. A couple of quick questions. First off, in terms of Evansville, now that you own WTVW, do you have plans to double up in that market? How do you (indiscernible) that vis-a-vis total leverage? I think just as part of that question as well, where do you target sort of a year-end leverage (indiscernible) both the (indiscernible)? Then one follow-up.

I will let Bob speak to the leverage question and I can speak to Evansville.

Thank you, Bill. We are targeting the leverage at the operating company level to be in the mid 4s by the end of the year, at the wholesale level, about a turn above that, so mid 5s.

I think that is achievable, obviously, given our current projections and how we see the year playing out. Obviously, that is going to be where we will focus our time and attention. Evansville is, for us, is a good station; it is a core station; it is the kind of station and market that we would like to be in. Obviously, we inherited a contract to sell the station when we bought Quorum. We were willing to perform under the terms of the contract; the buyer was not. It would've been sold at an accretive multiple to its trailing cash flow. Obviously, we have made substantial progress in improving that trailing cash flow on a pro forma basis by taking in excess $500,000 out of the operating expense line. It is the only VHF station in a Top 100 Midwest market. They're a couple of potential duopoly opportunities and partners for us in the marketplace, none of which has been explored to date. We've just been doing the stayed (ph) work of improving the station. We will invest, as I mentioned, in excess of $500,000 in capital to give the station the tools it needs to compete and grow. We're very pleased with the management team that we have inherited there and we have been working closely with that station. I was on the phone with our COO, Duanne Lammers, yesterday. He remarked to me, he said, "I don't think we've gotten more done in a particular station than we have in Evansville since we ultimately took it over or took it back in the middle of January." So it is the kind of property that we would like to buy. Again, with the kind of estimates that I have given you, it will be accretive to us on a pre cash flow basis, assuming we deliver on our performance expectations for 2004.

Bill, did I answer all of your questions?

Yes, and then just one follow-up (indiscernible). Of the double-digit projector first-quarter revenue growth, what is the core growth, leaving out the NCR (ph) initiatives? How did that look in terms of the fourth quarter? Again, kind of core growth and then core growth less NCR (ph)?

Well, night we have never disaggregated our growth from -- I mean, it is all part of the total and it is all one set of inventories. So our core growth in the first quarter is higher than our core growth in the fourth quarter was on a percentage basis.

Without the NCR, I'm not sure that I could quantify or qualify that. I think probably maybe the Datapoint is that national revenue for the first quarter, which does not participate to the degree that local does in any of our value-added marketing initiatives, was up itself a mid single digit, excluding political. We think that speaks to increasing confidence of advertisers and folks realizing that they need to spend.

As I said, as I look forward to the second quarter, we have just completed the calls with all 44 of our stations. These are three-hour exercises per station, account by account and category by category. We're projecting continued growth in our core with the political layered on top of that. So I think that is probably the best that I'm going to be able to do in answering that particular question for you, Bill, although if you want to come at it another way, I am perfectly happy to try and be responsive.

What about this general margins (sic) on the NCR business? If you could compare that to the core spot sell business?

Sure. Margins on our NCR (ph) business -- I will not greenlight an NCR initiative that is not modeled to deliver at least a 5-to-1 return. I can tell you that, with the Viewers Club and with our Infoline project, our returns are closer to 10-to-1 versus deployed expenses and net revenue realizations. So obviously, these initiatives are -- (technical difficulty) -- only greenlighted or entered into if they have the ability to enhance our margins and not just increase our cost of doing business.

All right, thank you very much.

Todd Morgan (ph) with CIBC World Markets.

Good morning. Perry, I was hoping you could talk a little bit more about the revenue growth that you had. I mean, you have obviously grown very quickly. Can you give us a sense of how much of that growth is fully coming from sort of share shifts from the other stations in your markets? How much is that really representing (inaudible) T.V?

Secondly, could you talk about how you might see those trends evolve over the next couple of years?

We obviously know that our focus in our stations is on generating new advertising, new business through not only non-traditional but also just generating new television advertisers. One of the metrics by which we judge our stations is numbers of accounts on air. I can tell you that the stations that are most successful have 100 more accounts on air per month than the stations that are less mature, so it is a combination of both.

I would say that, obviously, with our inventory management initiatives in the new stations, that is designed to grow share from existing business with better yield management. Obviously, that share would come from other places.

We do have new television business on the air. H&R Block is new to our markets this year. We have advertisers that have been -- Southwestern Bell is active. I don't consider that new but they have not been on the air for a year, and it's primarily a long distance initiative in our Midwest states. So, we don't count that as new but it is certainly incremental and returning money to the market after an absence of more than one year.

Again, as we have projected out into second quarter on a station-by-station and account-by-account basis, we see those trends continuing, which obviously are the underpinnings of continued core growth in the mid single digits at this point. Obviously, you have got one set of inventory; you've got a layer of the political revenue incrementally on top of that, which puts demand on the rest of the inventory. But I think we have struck a pretty good balance here of focusing on the fundamentals but then also maximizing the political opportunity when it becomes available. In fact, I write a monthly memo to each of our general managers and that was the topic of our February memo, was making sure that we do not take our eye off of the ball of continuing to build the base of our business and not wait for political; let's just maximize that opportunity when it comes. We don't have much control over that. What we do have control over is developing new dealer co-ops, expanding our participance in our Viewers Club or our Infoline, getting -- selling out booth space for the third consecutive year for the Bridal show and the Senior show in Wichita Falls, Texas, which we've done. We charge admission for those events as well, so that is additional revenue that doesn't take up spots. There is a tremendous focus on this.

All of our general managers will be in New York for the TVB convention in April. We're spending the following day at an all-day sales meeting. There will not be topics discussed other than sales projects and best practices and it is a full day with our general managers, again just reiterating our focus and bringing new ideas to the table as to ways to continue to build the base of our business.

Okay, thanks.

Shannon Ward (ph) with AIG.

Hi, thanks (indiscernible). (inaudible). Can you tell me the -- I'm looking at the 6.4 times pro forma leverage number that you discussed in the press release and I back into something like a $74 million EBITDA number using (indiscernible). Am I far off, or is that about right?

That is about right as it is calculated in compliance with our credit facility.

What do they do that is different? Is it really just that they would (indiscernible) all of the pro forma number for all of the acquisitions for the full year?

It's the pro forma numbers for the acquisitions for the full year and also coupled with the projected cost take-outs for those stations as well, so it is a real pro forma number.

Okay. How much is -- approximately can you just give me a sense for how much cost take-out they are letting you add back?

It is about 13.8 million, which includes the corporate overhead add-back as well as there is additionally about 1.5 to 1.6 million added back for network compensation, tax received in excess of amounts recognized from in the P&L as well. Those are the two primary items.

Okay, so you're adding back all of the Quorum overhead of about 12 million then?

No, the Quorum overhead was in the mid 5s. Then there is additional cost take-outs from the Quorum stations as well as all of the other acquisitions that we've done during 2003.

Okay, so it may seem (inaudible) components the Quorum overhead, other cost take-outs plus and the network comp add-back?

That is correct.

Okay. I think I heard you mention that 9 million was a good run rate for corporate overhead in '04. Is that right?

Right, somewhere in the 9s. That is correct.

That was our base prior to Evansville. Obviously, there are expenses, Shannon, that we carry at corporate for each station that we operate. I think just a very conservative number would be -- take that to the mid 9s, add about $500,000 million to the corporate overhead and that should be sufficient for what the full year would look like, including the Evansville station.

Of the reported EBITDA, you know, 58 million, can you break out for me just generally how much of that is Quorum and how much of that is (inaudible) Heritage Nexstar, including the acquisitions you made in '03?

I'd tell you, if you go up to the BCF line and look at that, Quorum contributes probably about, to the full year, somewhere in the neighborhood of 30 percent to the Bcf line. Then when you take the Bcf number and look at -- you know, subtract the Nexstar corporate overhead, which was about 6.9 million, that is kind of how I look at an EBITDA number for the year, as we really started ramping up in the back half of the year on our Nexstar corporate overhead to make the Quorum acquisition.

Okay. My last question is the relative margins, Bcf margins, of the two groups -- can you remind me what those were in '03?

The Bcf margins were trailing Nexstar by the high single digits. Obviously, we announced earlier, prior to WTVW, that we had about $4.6 million of cost take-outs. (indiscernible) taken actions to implement those cost take-outs by the end of 2003, so we will be able to enjoy the full benefits of those in the 2004 year. We captured a portion of those during the fourth quarter of 2003. Once again, Evansville adds about another half-million to that run rate for the year and we took actions to be able to realize those benefits by the end of this first quarter.

Just in general, the Nexstar station margin is in the mid 40s and at the time when we took over the Quorum stations, they were in the mid 30s. With the (indiscernible) take-outs that we have executed in the Quorum stations on a full year pro forma basis, those stations would now be contributing at approximately a 40 percent margin. Obviously, there is upside yet for us to realize there were contract that are not efficient to buy out but we know that we can, at their expiration, renew them with another vendor or leverage down with the current vendor to equalize those margins. There is no reason why the Quorum stations cannot contribute at the Nexstar realized margins. We operate in the same sized markets; we operate the same virtual duopoly strategy in a number of cases. The only difference, I think, in the Quorum stations -- they had no stations that were Number One news in their marketplace, where our stations that our Number One and Number Two in news in our local markets comprise about two-thirds of our total local news operations. Again the ones that are not are ones that are fairly recent acquisitions, and that includes the Quorum stations. So there is upside potential there as well, not only in the margin side but on the top-side revenues as well as growing ratings for news. In fact, our news VP was in Amarillo for a number two days yesterday just covering basic two days earlier this week, got back this morning -- covering basic blocking and tackling formatting, anchor performance issues and those kinds of things, and she was in Springfield the week before.

Thank you very much.

Adam Spielman (ph) with PPM America (ph).

Thank you. Just a quick clarification on this, I guess, bank defined EBITDA (inaudible) of 74. As we go back to when you came out with the original financing, I believe there was a number something around 77, but that excluded Evansville. Is that correct?

That is correct. That was also a 9/30/03 pro forma number, so obviously, we roll that forward to 2003 year and use the fourth quarter '02 political.

So we kind of go to -- 77 goes to 80 because we can now include Evansville and then we have to roll off --?

No, no, 77 includes Evansville (indiscernible) 74 includes Evansville.

Right. I'm just trying to go back to 9/30 and understand what the implication of rolling forward the quarter was, because you lost a lot of political. But basically 77 becomes 74?

That is correct.

That is --.

Actually, with Evansville, you would have been up in the 80 range.

Okay, so 80 becomes 74 and that's apples-to-apples, so the 6 decline is the loss of political?

That should be pretty close, yes.

Okay. Just understanding -- you disclosed some cash interest in the release. I think it is on the order of 51 million for the year. Has that got some lumpy payments in it, if you look -- (Multiple Speakers)?

It does include the payment we made on the 12 percent bond on October 1st. That number also includes about $10.6 million of nonrecurring payments. As I discussed earlier in the call, 6.7 million related to the accelerated amortization of call premium on the paydown of the Quorum senior discount notes, as well as about 3.9 million that related to payments under the (indiscernible) that we made. You know, we made the FAS 150 adjustments mark-to-market (inaudible) redeemable units. Then we paid off at year end as well.

I got it, thanks. Final question -- if I look at GAAP reported revenues for Q4 '03 versus Q4 '02, obviously we have a decline driven partly by political, because you mentioned the month of Quorum is in both of these years, right?

No, the full quarter is in both periods. Quorum is accounted for (indiscernible) a point of interest and it is fully represented and reflected in the numbers for each period.

Remind me, when did you close Quorum again?

Quorum closed on December 30, 2003.

So if I just look and I see '03 revenue of 214 million versus 206 million, it is the other acquisitions that were made during 2003 that are driving that increase over 2002, even though we lost political?

That would be the maturity of the increase, yes.

Gentleman, there are no further questions in queue.

Thank you very much. I would like to thank everyone for participating in our call. Nexstar has a very bright future ahead of us in 2004 and beyond. Everything we do here is geared toward creating shareholder value, whether it's adding strategic assets to our portfolio, improving margins, developing ways to generate incremental revenue or strengthening our balance sheet. We value the trust that you all have placed in us through your investments and we look forward to delivering superior results in the periods ahead.

Thanks again for listing this morning.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 with an ID number of 339224. This includes our conference for today. Thank you all for participating and have a nice day.