Nexstar Media Group Inc (NXST) 2007 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Nexstar Broadcast 2007 fourth-quarter and year-end financial results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded Thursday March 6, 2008. I would like now turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning everyone. I just want to read through the Safe Harbor language and then we will turn the call over to management.

All statements and comments made by management during this conference call other than statements of historical facts may be deemed forward-looking statements within the meaning of Section 21 of the Securities Act of 1933 and Section 21 A of the Securities and Exchange Act of 1934. The Company's future financial conditions and results of operations as well as forward-looking statements are subject to change.

The forward-looking statements and comments made during the conference call are made only as the date of today's call.

Management will also be discussing non-GAAP financial information during this call. In compliance with Regulation G, reconciliations of this non-GAAP information to GAAP measurements are included in today's news announcement and on the Company's website. The Company does not undertake any obligation to update forward-looking statements reflective of changes and circumstances.

At this time I'd like to turn the call over to Perry Sook, Nexstar President and CEO and founder of Nexstar Broadcasting. Please go ahead, Perry.

Thank you, Joe, and good morning everyone. I'd like to also let you know that Matt Devine, our Chief Financial Officer, is here with me this morning and we're delighted to be here today to discuss how Nexstar's role as an industry innovator has resulted in another period an excellent operating performance and after our prepared remarks we will turn the mic open to Q&A.

Nexstar's fourth quarter revenue BCF and EBITDA surpassed our guidance and our consensus expectations. The $71.6 million of net revenue for the quarter ended December 31, 2007 was inclusive of approximately $1.8 million of gross political revenue and that compares with $77.2 million of net revenue in the 2006 fourth quarter. And in that number was included approximately $16.7 million of gross political advertising.

The $14.9 million of non-election-year drop off in Q4 political revenue was partially replaced with growth in one, core ad sales; two, new media; and three, re-transmission revenues which those three and the aggregate amounted to approximately $8 million for the quarter. Let me reviews some of the highlights of our Q4 and full year 2007 results.

For 2007 year, we successfully succeeded in overcoming the odd year, even year revenue disparity related to the political ad cycle. Our net revenue for the full year was $266.8 million, a $1.6 million increase over the $265.2 million for 2006. In the quarter, our new local direct billings were $3.7 million in the fourth quarter.

On a dollar basis our top five performing markets in terms of developing and bringing new advertisers onto the air and online during the period where Lubbock, Texas; Shreveport, Louisiana; Springfield, Missouri; Amarillo, Texas; and Rockford, Illinois. Our total top 10 category billing increased 1.7% for the fourth quarter led by gains in automotive, fast food, restaurants and medical and health care.

During the quarter our automotive ad spend increased almost 10% year-over-year and it comprised approximately 24% of our core advertising compared to 22% in Q4 of '06. The gain was led by both factory and dealer group spending and almost two-thirds of our revenue in this category came from local dealership advertising in the fourth quarter.

Our quarterly retransmission consent revenues were $4.6 million compared with $4.1 million in Q4 of '06. On a full-year basis, our retransmission consent revenues were up 26% to $17.2 million.

We benefited both in the quarter and throughout 2007 from new additional retransmission agreements as well as increased subscriber count under certain of our other existing agreements. More of the same is in store for 2008 and 2009.

New media revenue in Q4 was $2.3 million compared to less than $100,000 in the fourth quarter of '06. We indicated in early '07 we expected a low to mid seven figure revenue contribution from our new media initiatives in 2007. Our full-year 2007 new media revenue totaled $5.1 million. We expect to double this revenue line in 2008.

We've also indicated that we believe within the next four years approximately 30% of the Company's EBITDA will be generated from new nontraditional initiatives such as our online revenues, our retransmission consent revenues and other digital revenue sources. With over $22 million of this high-margin revenue generated in 2007, we're definitely on a path to achieve that goal.

Our free cash flow totaled $9.8 million in the fourth quarter of 2007 versus $12.4 million in the fourth quarter of 2006. On a full-year basis free cash flow rose $400,000 over 2006 to $28 million.

Looking at 2008 our revenue drivers including political, new media, retransmission, our nexstarGREEN and DTV Answers revenue initiatives collectively are expected to generate between 40 and $50 million in incremental revenue on a combined basis in 2008. I'll talk more about these revenue sources in just a few moments.

We will use the free cash flow generated in 2008 to strengthen our balance sheet and further reduce our leverage. Our leverage had fallen to the lowest level in the Company's history so we will enter 2009 with more revenue drivers, less debt, less interest expense and the completion of our DTV buildout CapEx behind us.

Let me now turn the call over to Matt Devine. Matt will provide deeper detail on our financials and our guidance after which I will come back to run through the 2008 revenue drivers. Matt?

Thank you, Perry. I'd like to review some of the detailed line items on the Company's income statement and balance sheet for both the fourth quarter and the full-year periods. I will also report this information on both a GAAP and a same-station basis.

For the fourth quarter of 2007, our net revenues totaled $71.6 million compared with $77.2 million in the year-ago period. Broadcast cash flow totaled $28.2 million versus $33.8 million last year. EBITDA totaled $24.1 million compared with $29.3 million in the year ago period.

Total gross revenue in the fourth quarter was $80 million compared with $87 million last year. Gross local revenues came in at $46.6 million up compared to '06's fourth quarter of $43.3 million. Gross national revenues came in at $19 million compared with $17.2 million in the year-ago quarter. Political revenues totaled $1.8 million in the fourth quarter of '07 compared with $16.7 million in the fourth quarter of the election year of '06.

New media revenues again $2.3 million compared with $100,000 last year. Cash retransmission revenues totaled $3.1 million compared with $2.4 million last year and total retransmission revenue was $4.6 million in the fourth quarter of '07 compared with $4.1 million in the fourth quarter of '06.

The Company generated a 39.3% BCF margin in the fourth quarter of '07. As Perry noted the $14.9 million decrease in Q4 political revenues compared with the prior year was partially replaced with core revenue growth as well as a growing contribution from our digital initiatives.

Nexstar's fourth quarter 2007 corporate overhead costs were at the low end of our guidance range at $4.1 million and this included $600,000 of non-cash employee stock option expense. In the fourth quarter of '06 corporate overhead totaled $4.5 million and included $300,000 in employee stock option expense.

Free cash flow was $9.8 million in the fourth quarter of '07 compared to $12.4 million in the year-ago quarter. The Company incurred $4.9 million of CapEx spending in the fourth quarter of '07 of which $1.9 million related to our HDTV buildout compared with a total of $7.6 million incurred in the fourth quarter of '06.

We project CapEx spending of $33 million in 2008 of which approximately $29 million will relate to the completion of our HDTV conversion expenses. In 2007 our total CapEx spending was $18.5 million and approximately $9 million of that was related to the HDTV buildout.

As far as same station comps go in the fourth quarter, Nexstar's fourth quarter net revenue was $68.1 million compared with $77.2 million in the fourth quarter of '06. BCF came in that $26.4 million compared with $33.8 million in the fourth quarter of '06 and EBITDA totaled $22.3 million compared with $29.3 million in the same period of '06.

Same station results exclude the operating results from WTAJ, the CBS affiliate serving the Johnstown, Altoona Pennsylvania market and WLYH, the CW affiliate serving the Harrisburg, Lancaster Pennsylvania market. These stations were acquired on December 29 of 2006.

Moving to full year results, full year 2007 gross revenues totaled $298.4 million compared with $298.3 million in the election year of 2006. Gross local and national advertising revenues which totaled $249.8 million in '07 compared favorably with the $235.7 million for full-year 2006, an increase of basically 6%.

Retransmission consent revenues which consisted of cash subscription payments and advertising spending totaled $17.2 million in the 2007 period compared to $13.7 million in 2006 and this equates to a 25% increase. New media revenues totaled $5.1 million in 2007 versus the $100,00 we previously mentioned in '06.

For more details on some line items for the full year P&L again net revenues totaled $266.8 million compared to $265.2 million in '06. Broadcast cash flow totaled $98.5 million compared with $103.1 million in '06. EBITDA came in at $85.1 million for full-year '07 compared with $88.5 million in '06.

Total gross revenues were $298.4 million up $100,000 compared to 2006 number. Gross local revenues came in at $175.5 million compared with $164.1 million in 2006. Gross national revenues, $74.3 million compared with $71.6 million. Gross political for the full year '07 totaled $4.3 million compared to $27 million in the election year of '06.

Gross new media revenues, $5.1 million versus $100,000 in '06. Gross cash retrans, $11.8 million compared with $8.7 million. And total retrans revenue came in at $17.2 million versus $13.7 million in '06.

Corporate overhead for the full year totaled $13.4 million and included $2 million of non-cash stock option expense in 2007. And this compares favorably with $14.6 million of corporate overhead in 2006 and $1.6 million of non-cash stock option expense. Again EBITDA totaled $85.1 million in 2007 compared with $88.5 million in '06.

Free cash flow increases 1.5% to $28 million in 2007. On a same station basis Nexstar's 2007 net revenue totaled $255 million compared with $265.2 million in 2006. Broadcast cash flow on a same station basis came in at $93.4 million compared with $103.1 million in '06 and again EBITDA came in at $80 million in '07 compared with $88.5 million in '06.

As far as the balance sheet goes, cash on hand to at the end of 2007 totaled $16.2 million compared with $11.2 million at 12-31 of '06. Our outstanding bank debt was $356.7 million at year-end '07 compared with $370 million at 12-31-06. Our 7% notes totaled $198 million resulting in operating Company net debt of $538.5 million at year-end '07 compared with $556.7 million at year-end '06.

Leverage at 12-31-07 as defined in our October 2005 amended senior credit facilities was 6.3 times. The October 2007 amended facility covenants provide for a total leverage covenant of seven times through 12-31 of '07. At the holding company level our 11 3/8% notes totaled $126.5 million at 12-31-07 compared with $113.2 million at 12-31-06.

And so if you were to calculate total debt at the holding company of $681.2 million at year-end which is basically what it was at year-end '06 as well, our hold (inaudible) leverage ratio would calculate to be 7.6 times. As reported in this morning's announcement at year-end 2008, we're projecting total leverage not to exceed 5.5 times and that would be at the hold cold level.

Our guidance for the first quarter as noted in our earnings release this morning calls for net revenue of between 63.5 to $65 billion up compared to the $62.1 million in the year-ago first quarter. Station operating expenses are projected to fall between 42.5 and $43.5 million and corporate overhead should come in somewhere between 3 and $3.3 million compared to $3 million in the first quarter of '07.

That concludes the financial review for the call and if there are any modeling questions, I will be available in the office and we can address them specifically. I'll now turn the call back to Perry for some final remarks before Q&A.

All right, thanks very much, Matt. Let me spend a few minutes talking about our 2008 political spending, updating you on our digital revenue sources, the January '08 acquisition of a KTVE in Monroe, Louisiana as well as some recently launched sales initiatives which proved to be highly successful.

First, political. Our total political ad spending for 2008 based on record and still growing fund-raising for the industry is estimated at upwards of $4 billion with local TV broadcasters poised to take about two-thirds of that amount. Importantly, news content which is one of our strengths with over 650 hours a week of local news is particularly attractive to the candidates given the correlation between news viewers and those who vote.

I'm happy to report that spending has been robust for the just concluded Texas primary elections with the democratic nominating process still very much a two horse race. We have alreayd received requests for time from both of the candidates in our three Pennsylvania markets for the April 22 primary as well as requests in our three Indiana markets for the primary on May 6.

We stand to gain from the presidential spending surge as well as from the fact that we have several competitive statewide races this year in Arkansas, Missouri, Pennsylvania, Louisiana, Indiana and Texas as well as about a dozen competitive congressional races across our footprint. Our base projection for 2008 political revenue was in the low to mid $30 million range which is above the approximate $27 million that we booked in both 2004 and 2006.

The upside from political alone will result in Nexstar generating significant free cash flow and we intentionally tie in the completion of our digital conversions and our HDTV rollout to coincide with the 2008 political cycle.

Second, digital initiatives, the majority of our first retransmission agreements were three years in length and were completed in late 2005. About 47% of our contract dollars expire in the latter half of this year with another 30% of our revenue or so coming up for renewal in 2009. As a result we will see revenues ramp up throughout 2008 with an even more significant gain in 2009 as we begin to get the full year effect of the deals that are redone in this year.

In 2007 Nexstar relaunched all of our television station websites with community portal focus across our local markets. These website relaunches were completed late in the first half of 2007 as you will recall and the Company's new media platform is now positioned to deliver certain solutions to national accounts as well and the local advertisers have flocked to our medium.

Our new media initiatives are pacing at an annual revenue run rate of approximate $10 million which represents annualized growth of 100% over what we earned in 2007. The KTVE acquisition in January, we reported that we entered into local service agreements with Mission Broadcasting for KTVE, the NBC affiliates serving the Monroe, Louisiana; Eliminate Dorado, Arkansas market.

The new local service agreement represents the 50th television station that Nexstar will own, operate, provide or program -- provide program or provide sales and other services to. Nexstar is now doubled up in 18 of the 29 markets in which we operate.

Mission Broadcasting purchased the assets of KTVE for approximately $7.8 million while Nexstar owns KARD, the Fox affiliate in the market. We believe that this is another transaction that brings clear strategic and financial benefits to Nexstar. This LSA will be immediately accretive to Nexstar's operating results as the KTVE purchase price represents a mid-single digit multiple of the station's last 12 month broadcast cash flow.

As with other transactions we expect to meaningfully reduce the purchase price multiple and increase cash flow with the combination of certain operations of KARD and KTVE within the market. We will also benefit from synergies with KTAL-TV our NBC affiliate in the neighboring Shreveport DMA.

Onto new sales initiatives, through our nexstarGREEN, on-air and online initiative which we announced early in 2008 we're making our viewers more aware of measures they can take to positively impact our environment. This multifaceted campaign underscores the Company's commitment to corporate responsibility while extending our long-term track record of establishing new revenue streams complementary to our core broadcasting activities. Overall, we expect to realize mid-six-figure cost savings in 2008 as a result of reducing waste and our environmental impact as a Company.

nexstarGREEN is also providing or rather proving to be another avenue for establishing a revenue source that leverages our core broadcasting activities. As of today we secured approximately $1.8 million of sponsorship revenue for 2008 putting us solidly on track to generate several million dollars in new revenue from this initiative this year.

Finally, through Nexstar's DTV Answers initiative which introduced three weeks ago our full year on-air and online awareness and educational campaign is in effect now as we count down to the government mandated deadline for digital broadcasters. Each our stations as well as our local market Web portals are now offering data to ensure that our viewers receive all of the relevant information necessary during the analog to digital signal transition.

And Nexstar's DTV Answers campaign is also shaping up to be additional channel for revenue growth as sponsors align themselves with this program as their primary local source for DTV education. In three weeks we secured over $0.5 million in sponsorship commitments from this initiative.

In closing, our 2007 results exceeded our expectations which a direct reflection of Nexstar's strategies to consistently grow and diversify our business. The outlook for 2008 is of course positive with broadcast television expected to generate year-over-year growth as a result of the presidential and other elections, the summer Olympics from China, the ongoing development of our digital offerings, the deleveraging of our balance sheet and the conclusion of our HDTV spending. Collectively we believe these items will translate into substantial value creation for our shareholders this year and going forward.

With that said let's go to the Q&A and address your specific areas of interest. Operator?

(OPERATOR INSTRUCTIONS) Victor Miller, Bear Stearns.

First on just the auto side I'm really pleasantly surprised on the auto trends you have seen. You talked about the local dealers. Could you talk a little bit about what GM is doing in your markets whether you're seeing a shift there and whether indeed you're really starting to see a significant migration of dollars out of the newspapers because that's traditionally where the local dealers have spent most of their time and money.

Secondly, just in first quarter in terms of -- you talked about some of the cost initiatives that you've got $1.8 million in savings that you've outlined. First quarter expenses are obviously up in the 2.5 to 5% range or so predicted. That's not typical expense growth for the Company. So you could maybe outline that. And then one for Matt.

As you going into looking at that pick in April has the market changed substantially enough where you think you may have difficulty in ultimately taking that out or do have enough cash on the balance sheet to make a substantial dent in taking that out altogether? Thanks.

I'll get to this and that. Let me address the pick first. The Company has available under its revolving credit facility $60 million plus that is available for us to draw and we will use approximately $47 million of that to make our payment, our (inaudible) payment on April 1.

And so we don't see any problem making that payment and being in conformity with our leverage covenant for the rest of this year. Right now that piece of paper actually looks like a nice piece of paper in today's credit markets. So I don't see that being any kind of a problem for the Company.

To simply to convert that to the interest paying you will not try to refinance at this point?

That's correct to.

Victor, as it relates to automotive spending, approximately two-thirds of our revenue in the fourth quarter was from individual dealers and we take that obviously as a positive sign. We work very hard to make that happen. We are also migrating or attempting to migrate as part of our growth for the digital revenue this year dealers to our automotive classifieds program and actually we are successful in underscoring a big revenue commitment in West Texas this week from a particular multi-market dealer group to use our automotive classified program to literally put their entire inventory of cars online and the ability to change it at their will. So we view that as a positive marketing tool going forward.

As it relates to GM as you may know -- I'm sure you know that the GM plan works basically has given all of their dealer groups the option of either re-forming as a local dealer association or continuing to remain under the GM umbrella with guidance for their ad spending. And in the first quarter that decision is due to GM by the end of the quarter and our discussions with certain of the dealer association groups, this may have artificially suppressed spending in the first quarter as they're kind of in a state of suspended animation and waiting to -- basically waiting to make those decisions and allocate their funds.

All of which is to say we don't see automotive up double digits in the first quarter. In fact we probably see automotive being slightly under the 2007 first quarter performance as a category.

And your final question I think had to do with expense growth. The guidance we gave was on a GAAP basis and some of those numbers are being driven by the acquisition of KTVE and those operating expense numbers in the '08 numbers against obviously zero in the history. Other than that we're managing the business except for commissions and new media basically in the plus 1% operating expense range on a same station basis.

So are the acquisitions adding about one to three points on the top line in the expense growth? Is that what you're saying pro forma? So if these numbers were pro forma they would be more like what?

Probably in the 1 to 2% range. I don't have that information front of me but that would -- we're looking at total operating expenses in the $40 million range and definitely the KTVE acquisition would add a point plus to that.

Gotcha and that's same on the revenue line I imagine?

Yes.

Bishop Sheen, Wachovia Securities.

Let me just billboard one out when I ask about -- I want to go back to auto. I want to go to retrans and your quote of more of same after looking at 25% growth this year. So I'm just trying to get a feel for the size. And a little more exposition on DTV Answers and how that is a revenue generator.

And last I just want to doublecheck again -- the 5.5 times total implies maybe -- I don't know-- maybe $10 million more of EBITDA growth than I had envisioned? I just want to see if maybe my math is not working.

So let's start with auto. 10% you said for the year which is just incredible. And why is it that the your auto is doing better than comparable auto?

I think what we reported was 10% for the quarter for Q4 '07 was up about 9.9%. Again two-thirds of that number came from our individual dealer spending. We worked very hard to develop those relationships and advertising programs and sponsorships. And I think that that would be the key if everyone was reporting much lower-single digit growth they would have a higher percent of dealer association and factory money which you have less control over. So I can't speculate on other folks' results but I would only imagine that there's a correlation there.

And is it pretty democratic in that it's both new media, core revenue -- are you getting a lot of upsell?

I mean -- in automotive?

Yes.

Well if I look at automotive our spending growth came in on a percentage basis from Dodge, Ford, Jeep, Lexus, Mazda, Mercedes-Benz, Toyota and Volkswagen -- I mean they were all up substantial double-digit numbers as far as the nameplates go. And the focus here is on online and on-air. Obviously we do a fair amount with sports sponsorships whether it's the (inaudible) in Lubbock, Texas or the Arkansas Razorbacks in Fayetteville and those sell very well and we in addition to telecast and coaches' shows and nightly reports with automotive sponsors. So I don't know if I'm being -- directly answering your question here.

You are it sounds like it's every which way we can.

You said better than I can; every and anyway which way we can.

And then on retrans, not to treat you like a candidate here. But you said the words more of the same after the 25% growth. Should we think of retrans in that kind of magnitude in '08 and '09?

A couple of things come into play. First of all we have our first data on Verizon Fios and that's in the Fort Wayne marketplace, our first phone company deal and we have seen Verizon in less than six months take 10% of the television households not the cable or satellite households but they have 10% DMA penetration in Fort Wayne with their service. We know because we get a check every month multiplied by a certain number per subscriber and that's pretty phenomenal growth.

We now derive more revenue in Fort Wayne, Indiana from Verizon than we do from either of the satellite companies individually and at a substantial rate per sub related to contrast obviously which is the major cable player in the marketplace. So as the phone companies continue to populate markets, we see that as a revenue driver for us. And it's a positive arbitrage because we are at a number that is substantially above wherever that subscriber is rotating out of.

We have seen consistent subscriber growth yet from the satellite companies within our marketplace in our universe and we have added other deals with cable companies over builders that have come along. So we see continued growth in the category along the lines of what we talked about.

We have better than 40% of our revenue related to contract dollars expire or are tied to agreements that expire in 2008. So as we negotiate those and re-negotiate those and we're not the only race car on the track this time around, we expect our per-subscriber yield to continue to increase. So I think it is safe to assume that you will see similar increases on a percentage basis in 2008 and 2009 as we run through those negotiations.

That is very helpful. And on DTV Answers, how is that generating economics?

Well, we are running somewhere between 20 and 30 commercials per week in our marketplaces advising our viewers about the DTV transition. And whether we fall in with the NAB plan or the government mandate as to how many and where we run these commercials we're going to be running them on air and online daily through the DTV transition.

We thought it would be a very powerful force to go to an electronics retailer in a marketplace and say we're going to be running these commercials for the next year. How would you like to be the exclusive electronics retailer tied to these messages that we are going to be running everyday and by the way there's a rate for that?

So we have just started selling those across our marketplaces. Think of it if you would as sponsored PSAs but A, it gives us an incentive to run a lot of them. And B, it gives an advertiser a powerful incentive to be tied to the message that we're going to be delivering into the homes.

I understand. That is helpful as well. Perry, I'm disappointed. I thought you were going to talk Huckabee and Romney into staying in the race but I guess you missed that upside for '08. Last, Matt, are there any stepdowns in your mission and next-door agreements that come down from the seven times (inaudible) at year-end '07?

Yes, Bishop. We stepped down to 6.75 turns in the first quarter of '08. We stay there up until the fourth quarter of '08 when it goes down to 6.5 turns. We feel very comfortable saying to our total leverage through the hold call at year end will not exceed 5.5 turns. As we've called out, we expect to generate at least somewhere between 40 and $50 million in incremental revenues just due to the political year and the digital initiatives that are really exploding down here.

You know we're going to go -- we reported in '07 free cash flow was about $28 million. That will more than double in 2008 and will stay at the 2008 level in 2009 by the way when we get all for HDTV buildout done. So we are deleveraging very rapidly over here.

David Bank, RBC Capital Markets.

I was wondering if you could talk a little bit about how you think your markets compared to what we are seeing in terms of general trends in the macroeconomy. Are your markets particularly idiosyncratic -- I don't know maybe some of the Texas markets based on the oil economy or the beef economy or something in particular? And do you think that is impacting your performance in a positive way or a negative way in some economies? Because given the macro headlines the performance seems to be pretty good and the first quarter trend seems to be pretty get. What is your reflection there?

David, I will tell you that I think the further south and west you go, the better the overall market trends would be. And as you know our southwest region of Texas, Arkansas and Louisiana makes up about one-third of the revenues in the EBITDA of the Company.

I also think it is the hard work of diversifying our revenue channels and our focus on New Media. Right now today we have got more new media revenue on the books for the first quarter than we do political revenue. And you know we've been pretty public about the the fact that we expect our $5.1 million to virtually double in 2008 with the full year run rate of our local market portals being up and running for the full year.

So I think it's a retail focus. I think it's a new media focus. And operators at our highly incented and working very hard to deliver results in a -- I won't say difficult apartment but a challenging environment.

[Jordan Terrimo, Brigade Capital].

The political revenue -- you talked about some wins and the races heating up (inaudible) presidential as well and I guess I would have thought it might flow through more in Q1 but can you just give us how you expect it to kind of come in throughout '08?

Well, if history is any guide, we will generate depending on whether you look at '04 or '06 anywhere between 71% and 85% of our total year political revenue in the back half of the year, the last two quarters. So first quarter usually amounts for 7% or so of the political revenue that we would expect for the year. I will tell you our Pennsylvania and Indiana stations collectively represent about 25% of our revenue. Those are the primaries yet to play out.

The interesting this is as we predicted that once front runners were more clearly established that the [527] money would start to appear and that has exactly happened. We're starting to see time requests in Pennsylvania particularly for the [527] advocacy money. So I think that our political spending will be as advertised and very robust throughout the year.

Is it (inaudible) about Pennsylvania and the Texas races. Are those potentially things that can come in, in Q1 that you're just not assuming you're definitely going to get?

Well Texas is pretty much said and done although we've added some political revenue for a non-candidate who has a message he'd like to get out or maybe a candidate awaiting out in West Texas. But the Texas races pretty much are done.

The Pennsylvania primary is on April 22. We will see how soon they start to advertise, how much that'll impact in first quarter. We expect there will be some but again first quarter will represent probably a single digit percent of the total. Second quarter might press into the double digits but then you know approximately 80% of this revenue will come after the Fourth of July.

John Kornreich, Sandler Capital.

A few quick questions. When you talk about perhaps getting up to $35 million of political this calendar year, is that gross or net?

That would be gross, John.

And the 27 obviously a few years ago was also gross?

That is correct.

If I simply take something like $630 million of year-end debt assuming free cash flow is in the 50 plus area so it comes down from 680 something and then divide by 5.5 you get like $117 million of EBITDA up from 85. I know you're not doing explicit guidance but am I doing my arithmetic wrong?

You're in the ballpark. You're absolutely in the ballpark, John.

Okay, and the reason I'm a little puzzled with that is if you look at first quarter figures and you're guiding if I remember correctly -- I don't have it in front of me -- to revenue in the first quarter of about $2.5 million, right? You have got by my calculation an incremental $2.5 million of digital and retrans. You've got $0.5 million from Monroe incremental revenue and you have got whatever -- 1.5 to $2 million of political. So underlying all of this it looks like a pretty soft basic advertising environment.

I think you'll see growth in local regional revenue, a mid-single digit growth in the first quarter. National revenue is obviously as advertised is a category that is going to be flat to down. But political, new media, retrans, will be the drivers of the increase. You're absolutely right.

Local/national advertising in general you're saying is trending down so far?

Local will be up. National will be flat to down.

Those numbers don't add up but I won't get into anymore. I think that's about it. You're going to be at Bear Stearns, right?

Yes.

I've got a broad question I want to ask you about mobile TV and your views of it but I'll wait until then. Thanks.

[Edward Arturino, Benchmark].

I was on the same wavelength as John about the underlying trends of business. You mentioned auto and sort of the trends you talked about. Could you talk about some of the other categories that might be contributing to the Q1 trend in the [Court] TV business? You said auto was sort of flat to down. Any other big categories you would want to comment on?

As we look through this, the fast food restaurant will probably be in that flat to down area. You know we're seeing growth in insurance and attorneys and our telcom and cable media spending should be up as well. But you know it's going to be on a a local regional business (inaudible) kind of a mid-single digit reported increase and national business as we say will be flat to down.

But that's why we're working on new media, and political and retrans and the other drivers to develop a net revenue that is in fact up over the prior year and up rather substantially over the 2006 first quarter comparison.

Gotcha and the first quarter forecasting includes the new TV station KTVE?

That's correct.

Mr. Sook, there's no further questions at this time. I'll now turn the call back to you. Please continue with your presentation or closing remarks.

All right, well we will just close with thanking you all for joining us today and we look forward to reporting our first quarter results in about 90 days time. And if you have any follow-on questions, specific modeling questions please feel free to give Matt or I a call here at the office. Thanks for joining us today.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask you to please disconnect your lines.